The stockholders' equity accounts of Solomon Corporation on January 1, 2016, contained the following balances: Preferred Stock
Question:
The stockholders' equity accounts of Solomon Corporation on January 1, 2016, contained the following balances:
Preferred Stock (10%, $50 par value, 4,000 shares authorized)
Issued and Outstanding, 1,700 Shares................................... $85,000
Paid-in Capital in Excess of Par Value-Preferred....................... 1,700......... $ 86,700
Common Stock ($20 par value, 30,000 shares authorized)
Issued and Outstanding, 15,000 Shares..................................................... 300,000
Retained Earnings.................................................................................207,200
Total Stockholders' Equity.................................................................. $593,900
Transactions affecting stockholders' equity during 2016 follow.
INSTRUCTIONS
1. Set up a ledger account (381) for Retained Earnings and record the January 1, 2016, balance.
2. Record the transactions in general journal form and post them to the Retained Earnings account only. Use the account titles in the chapter.
3. Prepare a statement of retained earnings for the year 2016.
DATE TRANSACTIONS
June 15 Declared a semiannual dividend of 5 percent on preferred stock, payable on July 15 to stockholders of record on June 30.
July 15 Paid the dividend on preferred stock.
Dec. 15 Declared a semiannual dividend of 5 percent on preferred stock, payable on January 15, 2017, to stockholders of record on December 31, 2016, and a cash dividend of $4 per share on common stock, payable on January 15, 2017, to stockholders of record on December 31, 2016. Make separate entries.
15 Declared a 10 percent common stock dividend to common stockholders of record on December 31, 2016. The new shares are to be issued on January 15, 2017. A fair value price of $25 per share is expected for the new shares of common stock.
Dec. 31 Created an "appropriation of retained earnings for contingencies" of $60,000 because of the poor economic outlook.
31 The Income Summary account contained a debit balance of $20,000. The board had anticipated a net loss for the year and no quarterly deposits of estimated income taxes were made, so income taxes may be ignored.
Analyze: If Solomon Corporation had not declared cash or stock dividends for common stockholders, what balance would be found in the unappropriated Retained Earnings account at December 31, 2016?
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Step by Step Answer:
General Journal Page DATE DESCRIPTION POST REF DEBIT CREDIT 2016 June 15 Retained Earnings 381 4 2 5 0 00 Dividends Payable x Preferred 4 2 5 0 00 Declared 5 dividend on preferred stock payable July 15 to holders of record June 30 July 15 Dividends Payable x Preferred 4 2 5 0 00 Cash 4 2 5 0 00 Paid dividends on preferred Dec 15 Retained Earnings 381 4 2 5 0 00 Dividends Payable x Preferred 4 2 5 0 00 Declared 5 dividend on preferred stock payable Jan 15 2017 to holders of record Dec 31 2016 15 Retained Earnings 381 60 0 0 0 00 Dividends Payable x Common 60 0 0 0 00 Declared 4 dividend per share on common stock payable Jan 15 2017 to holders of record Dec 31 2016 15 Retained Earnings 381 37 5 0 0 00 Common Stock Dividend Distributable 30 0 0 0 00 Paidin Capital in Excess of Par Value x Common 7 5 0 0 00 Declared 10 stock dividend distributable Jan 15 2017 to holders of record Dec 31 2016 31 Retained Earnings 381 60 0 0 0 00 Retained Earnings Appropriated for Contingencies 60 0 0 0 00 Set up appropriation Closing Entry 31 Retained Earnings 381 20 0 0 0 00 Income Summary 20 0 0 0 00 Close Income Summary GENERAL LEDGER ACCOUNT Retained Earnings ACCOUNT NO 381 DATE DESCRIPTION POSTREF DEBIT CREDIT BALANCE DEBIT CREDIT 2016 Jan 1 Balance 207 2 0 0 00 June 15 J6 4 2 5 0 00 202 9 5 0 00 Dec ...View the full answer
College Accounting Chapters 1-30
ISBN: 978-0077862398
14th edition
Authors: John Price, M. David Haddock, Michael Farina
