Page 549 - Accounting Principles (A Business Perspective)

13. Corporations: Paid-in capital, retained earnings, dividends, and treasury stock

2002
Dec. 31 The board of directors authorized the appropriation of USD 50,000 of retained earnings to provide for
the future acquisition of a new plant site and the construction of a new building. (On the last day of the next six

years, the same action was taken. You need not make entries for these six years.)
2007
Jan. 2 Purchased a new plant site for cash, USD 100,000.
Mar. 29 Entered into a contract for construction of a new building, payment to be made within 30 days following
completion.
2009
Feb. 10 Following final inspection and approval of the new building, Dyer Construction Company was paid in

full, USD 500,000.
Mar. 10 The board of directors authorized release of the retained earnings appropriated for the plant site and
building.
Apr. 2 A 5 per cent stock dividend on the 100,000 shares of USD 50 par value common stock outstanding was
declared. The market price on this date was USD 55 per share.
Prepare journal entries for all of these transactions.
Problem D Following are selected data of Kane Corporation at 2009 December 31:
Net income for the year $512,000
Dividends declared on preferred stock 72,000
Retained earnings appropriated during the year for future plant
expansion 240,000
Dividends declared on common stock 64,000
Retained earnings, January 1, unappropriated 720,000
Directors ordered that the balance in the “Appropriation per loan
agreement”, related to a loan repaid on 2009 March 31, be returned
to unappropriated retained earnings 480,000
Prepare a statement of retained earnings for the year ended 2009 December 31.
Problem E The stockholders' equity of Sayers Company at 2009 January 1, is as follows:
Common stock – no-par value, stated value of
$20; 100,000 shares authorized, 60,000
shares issued $1,200,000
Paid-in capital in excess of stated value 200,000
Appropriation per loan agreement 75,200
Unappropriated retained earnings 424,000
Treasury stock (3,000 shares at cost) (72,000)
During 2009, the following transactions occurred in the order listed:

• Issued 10,000 shares of stock for USD 368,000.
• Declared a 4 per cent stock dividend when the market price was USD 48 per share.
• Sold 1,000 shares of treasury stock for USD 43,200.
• Issued stock certificates for the stock dividend declared in transaction 2.
• Bought 2,000 shares of treasury stock for USD 67,200.
• Increased the appropriation by USD 43,200 per loan agreement.
Prepare journal entries as necessary for these transactions.
Problem F The stockholders' equity of Briar Company on 2008 December 31, consisted of 1,000 authorized,

issued, and outstanding shares of USD 72 cumulative preferred stock, stated value USD 240 per share, which were
originally issued at USD 1,192 per share; 100,000 shares authorized, issued, and outstanding of no-par, USD 160

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