Question No 3:

Detto at the beginning of 2016. showed the following amounts in the stockholders’ equity section of its balance sheet:Stockholders’ equity:Common stock, PKR 1 par value, 1,000,000 shares authorized, 560,000 issued & outstanding . . . . . . ..……………………………………………………………………………………....PKR 560,000

Additional paid-in capital: capital stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . …….. 4,480,000

Total paid-in capital . . . . . . . . . . . . . . . . . . .….…………………………………………5,040,000

Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,000,000

Total stockholders’ equity . . . . .. . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . . . .………PKR 8,040,000

The transactions relating to stockholders’ equity during the year are as follows:

Jan.5 Declared a dividend of PKR 2 per share to stockholders of record on January 31, payable on February 18.

Feb. 18  Paid the cash dividend declared on January 5

.Apr. 20 The corporation purchased 2,000 shares of its own capital stock at a price of PKR 20 per share.

May 25 Reissued 1000 shares of the treasury stock at a price of PKR 24 per share.

June 15 Declared a 10 percent stock dividend to stockholders of record at June 22, to be distributed on June 30. The market price of the stock at June 15 was PKR 22 per share.

June 30 Distributed the stock dividend declared on June 15

.Aug. 12 Reissued 300 of the 1000 remaining shares of treasury stock at a price of PKR 13 per share.

Dec. 31 The Income Summary account, showing net income for the year of PKR 2,075,000, was closed into the Retained Earnings account.

Dec. 31 The PKR 650,000 balance in the Dividends account was closed into the Retained Earnings account.

Requirement:

a. Prepare in general journal form the entries to record the above transactions.

b. Prepare the stockholders’ equity section of the balance sheet at December 31, 2016. Include a supporting schedule showing your computation of retained earnings at that date.