Question
The post-closing trial balance of Wildhorse Corporation at December 31, 2021, contains the following shareholders equity accounts: $5 noncumulative preferred shares (10,100 issued) $1,161,500 Common
The post-closing trial balance of Wildhorse Corporation at December 31, 2021, contains the following shareholders equity accounts:
$5 noncumulative preferred shares (10,100 issued) | $1,161,500 | |
Common shares (415,300 issued) | 2,085,200 | |
Retained earnings | 3,166,450 |
A review of the accounting records reveals the following:
1. | The January 1, 2021, balance in Preferred Shares was $1,161,500, Common Shares was $1,326,000 (331,500 shares), the balance in Contributed SurplusReacquisition of Common Shares was $33,300, and the balance in Retained Earnings was $2,451,000. | |
2. | One of the companys shareholders needed cash for a personal expenditure. On January 15, the company agreed to reacquire 22,200 shares from this shareholder for $7 per share. | |
3. | On July 1, the company corrected a prior period error that resulted in an increase to the Long-Term Investment account, as well as to the prior years profit of $261,000 before income tax. | |
4. | On October 1, 106,000 common shares were sold for $8 per share. | |
5. | The preferred shareholders dividend was declared and paid in 2021 for two quarters. Due to a cash shortage, the last two quarters dividends were not declared or paid. | |
6. | Profit for the year before income tax was $771,000. The company has a 25% income tax rate. |
Open general ledger accounts for the shareholders equity accounts listed in item (1) above and enter opening balances.
Preferred Shares | |||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | ||||
Common Shares | |||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | ||||
Contributed SurplusReacquisition of Common Shares | |||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | ||||
Retained Earnings | |||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance |
Prepare journal entries to record transactions (2) to (5) and post to general ledger accounts. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)
Date | Account Titles and Explanation | Debit | Credit |
Jan. 15 | |||
(To record reacquisition of common shares.) | |||
Jan. 15Mar. 31Jun. 30Jul. 1Oct. 1 | |||
(To record cash dividend.) | |||
Jan. 15Mar. 31Jun. 30Jul. 1Oct. 1 | |||
(To record cash dividend.) | |||
Jan. 15Mar. 31Jun. 30Jul. 1Oct. 1 | |||
(To record correction of error.) | |||
Jan. 15Mar. 31Jun. 30Jul. 1Oct. 1 | |||
(Issued common shares for cash.) |
Preferred Shares | |||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | 1,161,500 | |||
Common Shares | |||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | 1,326,000 | |||
Jan. 15 | Reacquisition of shares | J1 | |||
Oct. 1 | Issue of shares | J1 | |||
Contributed SurplusReacquisition of Common Shares | |||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | 33,300 | |||
Jan. 15 | Reacquisition of shares | J1 | |||
Retained Earnings | |||||
Date | Explanation | Ref. | Debit | Credit | Balance |
Jan. 1 | Balance | 2,451,000 | |||
Jan. 15 | Reacquisition of shares | J1 | |||
July 1 | Prior period error | J1 |
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