Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Youve been hired to perform an audit of Hubbard Company for the year ended December 31, 2016. You find the following account balances related to

Youve been hired to perform an audit of Hubbard Company for the year ended December 31, 2016. You find the following account balances related to shareholders equity:

Preferred stock, $100 par $ 30,000
Common stock, $10 par 65,000
Capital surplus (16,400)
Retained earnings 150,000

Because of the antiquated terminology and negative balance, you examine the Capital Surplus account first and find in it the following entries:

Credit (Debit)

Additional paid-in capital on common stock $ 27,100
Capital from donated land 16,000
Treasury stock (500 common shares at cost) (7,500)
Additional paid-in capital on preferred stock 3,000
Stock dividend (50%) (20,000)
Prior period adjustment (net of income taxes) (12,000)
Loss from fire (uninsured), 2015 (18,000)
Property dividend declared (6,000)
Cash dividends declared (24,000)
Balance ($41,400)

Your examination of the Preferred Stock and Common Stock accounts reveals that the amounts shown correctly state the total par value of the issued capital stock. The Retained Earnings account contains the accumulated earnings of the company, with the exception of any items of retained earnings that were inappropriately debited or credited to the Capital Surplus account.

Required:

1. Prepare whatever journal entries are necessary to eliminate the Capital Surplus account and to correct Hubbards shareholders equity accounts.
2. Prepare a corrected shareholders equity section of Hubbards December 31, 2016, balance sheet. Include any related notes to its financial statements.

GENERAL JOURNAL

DATE ACCOUNT TITLE POST. REF. DEBIT CREDIT

1

2

3

4

5

6

Hubbard Company

Shareholders' Equity

December 31, 2016

1

2

3

4

5

6

7

8

9

10

11

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Apple Marketing Audit And New Service Product Plan

Authors: Sherry King

1st Edition

3656610797, 978-3656610793

More Books

Students also viewed these Accounting questions

Question

Identify three types of physicians and their roles in health care.

Answered: 1 week ago

Question

Compare the types of managed care organizations (MCOs).

Answered: 1 week ago