Stockholders Equity: Transactions and Balance Sheet Presentation

The following is the stockholders equity of Clipper Corporation at January 1:

8 Percent preferred stock, $40 par value, 10,000 shares authorized;
7,000 shares issued and outstanding	$280,000
Common stock, $20 par value, 50,000 shares authorized;
25,000 shares issued and outstanding	500,000
Paid-in capital in excess of par valuePreferred stock	70,000
Paid-in capital in excess of par valueCommon stock	385,000
Retained earnings	238,000
Total Stockholders Equity	$1,473,000

The following transactions, among others, occurred during the year:

Jan.	15	Issued 2,000 shares of preferred stock for $62 cash per share.
	20	Issued 4,000 shares of common stock at $36 cash per share.
	31	Converted $20,000 face value of convertible bonds payable (the book value of the bonds is $18,500) to common stock. Each $1,000 bond converted to 25 shares of common stock.
May	18	Announced a 2-for-1 common stock split, reducing the par value of the common stock to $10 per share. The authorization was increased to 100,000 shares.
June	1	Acquired equipment with a fair market value of $40,000 in exchange for 2,000 shares of common stock.
Sept.	1	Purchased 3,500 shares of common stock as treasury stock at $18 cash per share.
Oct.	12	Sold 900 treasury shares at $21 per share.
Dec.	22	Issued 600 shares of preferred stock for $59 cash per share.
	28	Sold 1,100 of the remaining treasury shares at $16 per share.
	31	Closed net income of $135,000 to the Retained Earnings account.

Required

a. Set up T-accounts for the stockholders equity accounts as of the beginning of the year and enter the January 1 balances.

HINT: Complete part b. below prior to entering any additional T-account data.

Cash
Jan.15	Answer	Answer
Jan.20	Answer	Answer
Sept.01	Answer	Answer
Oct.12	Answer	Answer
Dec.22	Answer	Answer
Dec.28	Answer	Answer

Bonds Payable
Jan.31	Answer	Answer

Discount on Bonds Payable
Jan.31	Answer	Answer

Equipment
Jun.01	Answer	Answer

Preferred Stock
Beg.	Answer	Answer
Jan.15	Answer	Answer
Dec.22	Answer	Answer
Bal.	Answer	Answer

Common Stock
Beg.	Answer	Answer
Jan.20	Answer	Answer
Jan.31	Answer	Answer
May.18		(2 for 1 split)
Jun.01	Answer	Answer
Bal.	Answer	Answer

Paid-in-Capital in Excess of Par Value - Preferred Stock
Beg.	Answer	Answer
Jan.15	Answer	Answer
Dec.22	Answer	Answer
Bal.	Answer	Answer

Paid-in-Capital in Excess of Par Value - Common Stock
Beg.	Answer	Answer
Jan.20	Answer	Answer
Jan.31	Answer	Answer
Jun.01	Answer	Answer
Bal.	Answer	Answer

Paid-in-Capital from Treasury Stock
Oct.12	Answer	Answer
Dec.28	Answer	Answer
Bal.	Answer	Answer

Treasury Stock - Common
Sept.01	Answer	Answer
Oct.12	Answer	Answer
Dec.28	Answer	Answer
Bal.	Answer	Answer

Retained Earnings
Bal.	Answer	Answer
Dec.31	Answer	Answer
Bal.	Answer	Answer

b. Prepare journal entries for the given transactions and post them to the T-accounts above in part a. Do not prepare the journal entry for the Dec. 31 transaction, but post the appropriate amount to the Retained Earnings T-account. Determine the ending balances for the stockholders equity accounts.

General Journal
Date	Description	Debit	Credit
Jan.15	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayableDiscount on Bonds Payable	$Answer	$Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayableDiscount on Bonds Payable	Answer	Answer
	Paid-in-Capital in Excess of Par Value - Preferred Stock	Answer	Answer
	Issued shares of preferred stock.
Jan.20	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayableDiscount on Bonds Payable	Answer	Answer
	Common Stock	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayableDiscount on Bonds Payable	Answer	Answer
	Issued common stock.
Jan.31	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayableDiscount on Bonds Payable	Answer	Answer
	Discount on Bonds Payable	Answer	Answer
	Common Stock	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayableDiscount on Bonds Payable	Answer	Answer
	To record conversions of bonds.
May.18	(Memorandum) Common Stock split 2 for 1.
Jun.01	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayableDiscount on Bonds Payable	Answer	Answer
	Common Stock	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayableDiscount on Bonds Payable	Answer	Answer
	Issued common stock in exchange for equipment.
Sept.01	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayableDiscount on Bonds Payable	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayableDiscount on Bonds Payable	Answer	Answer
	Purchased treasury stock.
Oct.12	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayableDiscount on Bonds Payable	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayableDiscount on Bonds Payable	Answer	Answer
	Paid-in-Capital from Treasury Stock	Answer	Answer
Dec.22	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayableDiscount on Bonds Payable	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayableDiscount on Bonds Payable	Answer	Answer
	Paid-in-Capital in Excess of Par Value - Preferred Stock	Answer	Answer
	Issued preferred stock.
Dec.28	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayableDiscount on Bonds Payable	Answer	Answer
	Paid-in-Capital from Treasury Stock	Answer	Answer
	AnswerCashCommon StockEquipmentPaid-in-Capital from Treasury StockPaid-in-Capital in Excess of Par Value - Common StockPaid-in-Capital in Excess of Par Value - Preferred StockPreferred StockTreasury Stock - CommonBonds PayableDiscount on Bonds Payable	Answer	Answer
	To record sale of treasury stock.

c. Prepare the stockholders equity section of the balance sheet at December 31.

Do not use negative signs with your answers.

Stockholders' Equity
	Paid in Capital
	AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-CapitalLess: Treasury Stock - Common	$Answer
	AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-CapitalPaid-in-Capital from Treasury StockLess: Treasury Stock - Common	Answer	$Answer
	Additional Paid-in-Capital
	Paid-in-Capital in Excess of Par value - Preferred Stock	Answer
	Paid-in-Capital in Excess of Par value - Common Stock	Answer
	AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-CapitalPaid-in-Capital from Treasury StockLess: Treasury Stock - Common	Answer	Answer
	Total Paid-in-Capital		Answer
	AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-CapitalPaid-in-Capital from Treasury StockLess: Treasury Stock - Common		Answer
			Answer
	AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-CapitalPaid-in-Capital from Treasury StockLess: Treasury Stock - Common		Answer
	AnswerPreferred StockCommon StockRetained EarningsTotal Stockholders' EquityTotal Paid-in-CapitalPaid-in-Capital from Treasury StockLess: Treasury Stock - Common		$Answer