Question
Gray Company lists the following shareholders equity items on its December 31, 2015, balance sheet: Gray Company Balance Sheet (Shareholders' Equity) December 31, 2015 1
Gray Company lists the following shareholders equity items on its December 31, 2015, balance sheet:
| Gray Company |
| Balance Sheet (Shareholders' Equity) |
| December 31, 2015 |
| 1 | Contributed Capital: |
|
| 2 | Preferred stock, 8%, $100 par | $120,000.00 |
| 3 | Common stock, $10 par | 180,000.00 |
| 4 | Additional paid-in capital on preferred stock | 21,600.00 |
| 5 | Additional paid-in capital on common stock | 90,000.00 |
| 6 | Total contributed capital | $411,600.00 |
| 7 | Retained earnings | 230,000.00 |
| 8 | Accumulated other comprehensive income: |
|
| 9 | Unrealized increase in value of available-for-sale securities | 6,000.00 |
| 10 | Total contributed capital, retained earnings, and accumulated other comprehensive income | $647,600.00 |
| 11 | Less: Treasury stock (2,000 shares of common at $21 per share, acquired on March 3, 2015) | (42,000.00) |
| 12 | Total Shareholders Equity | $605,600.00 |
The following stock transactions occurred during 2016:
| Jan. | 4 | Issued 3,000 shares of common stock at $25 per share. |
| 30 | Paid the annual 2015 per share dividend on preferred stock and the $2 per share dividend on common stock. These dividends had been declared on December 31, 2015. | |
| Mar. | 2 | Issued 400 shares of preferred stock at $125 per share. |
| May | 7 | Reissued 600 shares of treasury stock at $24 per share. |
| Jun. | 15 | Split the common stock 2-for-1, reducing the par value to $5 per share. |
| Jul. | 2 | Declared a 5% stock dividend on the outstanding common stock, to be issued on August 3. The stock is selling for $14 per share. |
| Aug. | 3 | Issued the stock dividend. |
| Oct. | 1 | Declared a property dividend payable to common shareholders on November 1. The dividend consists of 200 Lamb Company bonds that are classified as an available-for-sale investment. The bonds had been acquired at a cost of $24,000 and have a carrying value of $30,000. The bonds are currently selling for $32,000. |
| Nov. | 1 | Issued the property dividend to common shareholders. |
| Dec. | 31 | Declared the annual per share dividend on the outstanding preferred stock and a $1 per share dividend on the outstanding common stock, to be paid on January 30, 2017. |
Required:
| 1. | Prepare journal entries to record the preceding transactions. |
| 2. | Prepare the December 31, 2016, shareholders equity section (assume that 2016 net income was $225,000). |
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