3) Accounting, Analysis, and Principles

On January 1, 2014, Agassi Corporation had the following stockholders equity accounts.

Common stock ($10 par value, 60,000 shares issued and outstanding) ___ $600,000

Paid-in-capital in excess of par common stock _____________________ $500,000

Retained earnings _____________________________________________ $620,000

During 2014, the following transactions occurred.

Jan 15 Declared and paid a $1.05 cash dividend per share to stockholders.

Apr 15 Declared and paid a 10% stock dividend. The market price of the stock was $14 per share.

May 15 Reacquired 2,000 common shares at a market price of $15 per share

Nov 15 Reissued 1,000 shares held in treasury at a price of $18 per share.

Dec 31 Determined that net income for the year was $370,000.

(1) Accounting: Journalize the above transactions. (Include entries to close net income to Retained earnings.) Determine the ending balances for Paid-in-capital, Retained earnings, and stockholders equity.

(2) Analysis: Calculate the payout ratio and return on common stock equity.

(3) Principles: R. Federer is examining Agassis financial statements and wonders whether the gains or losses on Agassis treasury stock transactions should be included in income for the year. Briefly explain whether, and the conceptual reasons why, gains or losses on treasury stock transactions should be recorded in income.