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Amerspec Enterprise Inc.

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:
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, 2006.
4.Prepare the stockholders' equity section of the December 31, 2006 balance sheet.

Solution Preview

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 ...

Solution Summary

This solution is comprised of a detailed explanation to 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, journalize the entries to record the transactions, and post to the eight selected accounts, prepare a retained earnings statement for the year ended December 31, 2006, and prepare the stockholders' equity section of the December 31, 2006 balance sheet.

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