Answer:
Morrow Enterprises Inc.
A. January 1 balances in T-accounts:
Common Stock
Jan. 1 Balance b/d $7,500,000
Additional Paid-in Capital -Common Stock
Jan. 1 Balance b/d $825,000
Retained Earnings
Jan. 1 Balance b/d $33,600,000
Treasury Stock
Jan. 1 Balance b/d $450,000
B1. Journal entries to record the transactions:
Jan. 22
Debit Dividends Payable $28,000
Credit Cash Account $28,000
To record payment of $0.08 dividends per share.
April 10
Debit Cash Account $1,800,000
Credit Common Stock $1,500,000
Credit Additional Paid-in Capital $300,000
To record the issue of 75,000 shares for $24 per share.
June 6
Debit Cash Account $650,000
Credit Treasury Stock $450,000
Credit Additional Paid-in Capital $200,000
To record reissue of 25,000 shares of treasury stock at $26 per share and close the Treasury Stock balance to Additional Paid-in Capital.
July 5
Debit Stock Dividends $450,000
Credit Dividends Payable $450,000
To record the declaration of the 4% stock dividend on 450,000 shares of common stock.
August 15
Debit Dividends Payable $450,000
Credit Common Stock $360,000
Credit Additional Paid-in Capital $90,000
To record the issue of a 4% stock dividend certificates on 450,000 shares at $25
Nov. 23
Debit Treasury Stock $570,000
Credit Cash Account $570,000
To record the purchase of 30,000 shares of treasury stock for $19 per share.
Dec. 28
Debit Dividends $42,000
Credit Dividends Payable $42,000
To record the declaration of a $0.10 per share dividend on 420,000 shares of common stock.
Dec. 31
Debit Income Summary Account $1,125,000
Credit Retained Earnings $1,125,000
To close the credit balance of the income summary.
Dec. 31
Debit Retained Earnings $492,000
Credit Stock Dividends $450,000
Credit Dividends $42,000
To close the two dividends accounts.
B2) Posting to the selected accounts:
Common Stock
Dec. 31 Balance c/d $9,360,000 Jan. 1 Balance b/d $7,500,000
Apr. 10 Balance b/d $1,500,000
<u> </u> Aug 15 Dividend Payable <u>$360,000</u>
<u>$9,360,000 </u> <u>$9,360,000</u>
Jan. 1 Balance b/d $9,360,000
Additional Paid-in Capital -Common Stock
Dec. 31 Balance c/d $1,415,000 Jan. 1 Balance b/d $825,000
Apr. 10 Balance b/d $300,000
Jun. 6 Treasury Stock $200,000
<u> </u> Aug 15 Dividend Payable <u> $90,000</u>
<u> $1,415,000</u> <u>$1,415,000</u>
Jan. 1 Balance b/d $1,415,000
Retained Earnings
Dec. 31 Stock Dividends $450,000 Jan. 1 Balance b/d $33,600,000
Dec. 31 Dividends $42,000 Dec. 31 Income Summary $1,125,000
Dec. 31 Balance c/d <u>$34,233,000</u> <u> </u>
<u>$34,725,000</u> <u>$34,725,000</u>
Jan. 1 Balance b/d $34,233,000
Treasury Stock
Jan. 1 Balance b/d $450,000 Jun. 6 Cash $450,000
Nov. 23 Cash <u>$570,000</u> Dec. 31 Balance c/d <u>$570,000</u>
<u>$1,020,000</u> <u>$1,020,000</u>
Jan. 1 Balance b/d $570,000
Dividends Payable
Jan. 22 Cash $28,000 Jan. 1 Balance b/d $28,000
Aug. 15 Common Stock $360,000 Jul. 5 Stock Dividends $450,000
Aug. 15 Additional Paid-in$90,000 Dec. 23 Cash Dividends $42,000
Dec. 31 Balance c/d <u>$42,000</u> <u> </u>
<u>$520,000</u> <u>$520,000</u>
Jan. 1 Balance b/d $42,000
Stock Dividends
Jul. 5 Dividends Payable $450,000 Dec. 31 Retained Earnings $450,000
Cash Dividends
Dec. 28 Dividends Payable $42,000 Dec. 31 Retained Earnings $42,000
Income Summary Account
Dec. 31 Retained Earnings $1,125,000 Dec. 31 Balance b/d $1,125,000
C. Retained Earnings Statment for the year ended December 31, 2016:
Beginning Balance $33,600,000
Income Summary $1,125,000
Stock Dividends ($450,000)
Cash Dividends ($42,000)
Ending Balance $34,233,000
Explanation:
a) Cash Account
Apr. 10 Common Stock $1,500,000 Jan. 22 Dividends Payable$28,000
April 10 Additional Paid-in $300,000 Nov. 23 Treasury Stock $570,000
Jun. 6 Treasury Stock $450,000
Jun. 6 Additional Paid-in $200,000