Journal entries (where to debit/credit which account and why, why certain entries are adjusted because of activity in other accounts)
Common stock?$25 par value, 100,000 shares authorized, 50,000 shares issued and outstanding $ 1,250,000
Paid-in capital in excess of par value, common stock 70,000
Retained earnings 370,000
Total stockholders' equity $ 1,690,000
In year 2009, the following transactions affected its stockholders' equity accounts:
Jan. 1 Purchased 6,000 shares of its own stock at $15 cash per share.
Jan. 5 Directors declared a $6 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record.
Feb. 28 Paid the dividend declared on January 5.
July 6 Sold 2,250 of its treasury shares at $19 cash per share.
Aug. 22 Sold 3,750 of its treasury shares at $12 cash per share.
Sept. 5 Directors declared a $6 per share cash dividend payable on October 28 to the September 25 stockholders of record.
Oct. 28 Paid the dividend declared on September 5.
Dec. 31 Closed the $368,000 credit balance (from net income) in the Income Summary account to Retained Earnings.
The solution explains the journal entries and how to prepare the stockholders equity section in the balance sheet.