Washington Company has the following equity accounts at December 31, 2010. Share CapitalOrdinary$100 par value, authorized 8,000

Question:

Washington Company has the following equity accounts at December 31, 2010.

Share Capital—Ordinary—$100 par value, authorized 8,000 shares........ $480,000

Retained Earnings...................................................................................... 294,000

Instructions

(a) Prepare entries in journal form to record the following transactions, which took place during 2011.

(1) 280 ordinary shares were purchased at $97 per share. (These are to be accounted for using the cost method.)

(2) A $20 per share cash dividend was declared.

(3) The dividend declared in No. 2 above was paid.

(4) The treasury shares purchased in No. 1 above were resold at $102 per share.

(5) 500 shares were purchased at $105 per share.

(6) 350 of the shares purchased in No. 5 above were resold at $96 per share.

(b) Prepare the equity section of Washington Company’s statement of financial position after giving effect to these transactions, assuming that the net income for 2011 was $94,000. Country law requires restriction of retained earnings for the amount of treasury shares.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...