Case Scenario:
Amerspec Enterprise Inc. produces aeronautical navigation equipment. The stockholders' equity accounts of Amerspec Enterprises Inc., with balances on January 1, 2006, are as follows:
Common Stock, $10 stated value (100,000 shares authorized,
60,000 shares issued) ............................................................ $600,000
Paid-in Capital in Excess of Stated Value ................................... 150,000
Retained Earnings ............................................................... 497,750
Treasury Stock (7,500 shares, at cost) .......................................120,000
The following selected transactions occurred during the year:
Jan. 19. Paid cash dividends of $0.60 per share on the common stock. The dividends had been properly recorded when declared on December 28 of the preceding year for $31,500.
Feb. 2. Sold all of the treasury stock for $150,000.
Mar. 15. Issued 20,000 shares of common stock for $480,000.
July. 30. Declared a 2% stock dividend on common stock, to be capitalized at the market Price of the stock, which is $25 a share.
Aug. 30. Issued the certificates for the dividend declared on July 30.
Oct. 10. Purchased 5,000 shares of treasury stock for $105,000.
Dec. 30. Declared a $0.50-per-share dividend on common stock
31. Closed the credit balance of the income summary account, $182,500.
31. Closed the two dividends accounts to Retained Earnings.
Required:
Q1. 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.
Q2. Journalize the entries to record the transactions, and post to the eight selected accounts.
Q3. Prepare a retained earnings statement for the year ended December 31, 2006.
Q4. Prepare the stockholders' equity section of the December 31, 2006 balance sheet.