The stockholders equity accounts of Holmes Inc., at January 1, 2010, are as follows. Preferred Stock, $100
Question:
The stockholders’ equity accounts of Holmes Inc., at January 1, 2010, are as follows.
Preferred Stock, $100 par, 7% ............. $600,000
Common Stock, $10 par ................ 900,000
Paid-in Capital in Excess of Par Value—Preferred Stock .... 100,000
Paid-in Capital in Excess of Par Value—Common Stock ... 200,000
Retained Earnings ................... 500,000
There were no dividends in arrears on preferred stock. During 2010, the company had the following transactions and events.
July 1 Declared a $0.50 cash dividend on common stock.
Aug. 1 Discovered a $72,000 overstatement of 2009 depreciation. Ignore income taxes.
Sept. 1 Paid the cash dividend declared on July 1.
Dec. 1 Declared a 10% stock dividend on common stock when the market value of the stock was $16 per share.
15 Declared a 7% cash dividend on preferred stock payable January 31, 2011.
31 Determined that net income for the year was $350,000.
Instructions
(a) Journalize the transactions and the closing entry for net income.
(b) Enter the beginning balances in the accounts and post to the stockholders’ equity accounts.
(c) Prepare a retained earnings statement for the year.
(d) Prepare a stockholders’ equity section at December 31, 2010.
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Step by Step Answer:
Accounting Principles
ISBN: 978-0470533475
9th Edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso