Problem
Nav-Go Enterprises Inc. produces aeronautical navigation equipment. The stockholders equity accounts of Nav-Go Enterprises Inc., with balances on January 1, 2010, are as
follows:
Common Stock, $20 stated value (250,000 shares authorized,
175,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,500,000
Paid-In Capital in Excess of Stated Value Common Stock . . . . . . . . . . . . ..............1,750,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,600,000
Treasury Stock (40,000 shares, at cost) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....1,000,000
The following selected transactions occurred during the year:
Jan. 6. Paid cash dividends of $0.40 per share on the common stock. The dividend had been properly recorded when declared on November 29 of the preceding fiscal year for $54,000.
Mar. 9. Sold all of the treasury stock for $1,350,000.
Apr. 3. Issued 50,000 shares of common stock for $1,700,000.
July 30. Declared a 2% stock dividend on common stock, to be capitalized at the market price of the stock, which is $36 per share.
Aug 30. Issued the certificates for the dividend declared on July 30.
Nov. 7. Purchased 25,000 shares of treasury stock for $800,000.
Dec. 30. Declared a $0.45-per-share dividend on common stock.
31. Closed the credit balance of the income summary account, $400,000.
31. Closed the two dividends accounts to Retained Earnings.
Instructions
1. Enter the January 1 balances in T accounts for the stockholders equity accounts listed.
Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock;
Stock Dividends Distributable; Stock Dividends; Cash Dividends.
2. Journalize the entries to record the transactions, and post to the eight selected accounts.
3. Prepare a retained earnings statement for the year ended December 31, 2010.
4. Prepare the Stockholders Equity section of the December 31, 2010, balance sheet.