Page 553 - Accounting Principles (A Business Perspective)

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

Alternate problem G The stockholders' equity section of Sager Company's 2008 December 31, balance sheet
follows:
Stockholders' equity:
Paid-In Capital:
Preferred stock - $60 par value, 5%; $150,000
authorized, 5,000 shares; issued and
outstanding, 2,500 shares
Common stock – without par or stated value; 225,000
authorized, 50,000 shares; issued, 25,000
shares of which 500 are held in treasury
Paid-in capital in excess of par – preferred 3,000
Total paid-in capital $378,000
Retained earnings:
Appropriated:
For plant expansion $15,000
Unappropriated (restricted as to dividends to
the extent of $6,000, the cost of the treasury
stock held) 126,000
Total retained earnings 141,000
Total paid-in capital and retained earnings $519,000
Less: Treasury stock, common, at cost (500 6,000
shares)
Total stockholders' equity $513,000
Following are selected transactions that occurred in 2009:
Jan. 13 Cash was received for 550 shares of previously unissued common stock at USD 13.20.
Feb. 4 A plot of land was accepted as payment in full for 500 shares of common stock, and the stock was issued.
Closing market price of the common stock on this date was USD 12 per share.
Mar. 24 All of the treasury stock was reissued at USD 14.40 per share.
June 23 The regular semiannual dividend on the preferred stock was declared.
30 The preferred dividend was paid.

July 3 A 10 per cent stock dividend was declared on the common stock. Market price on this date was USD
16.80.
18 The stock dividend shares were issued.
Oct. 4 The company reacquired 105 shares of its common stock at USD 14.40.
Dec. 18 The regular semiannual dividend on the preferred stock and a USD 0.24 per share dividend on the
common stock were declared.
31 Both dividends were paid.
31 An additional appropriation of retained earnings of USD 3,000 for plant expansion was authorized.
a. Prepare journal entries to record the 2009 transactions.

b. Prepare a statement of retained earnings for the year 2009, assuming net income for the year was USD
25,800.
c. Prepare the stockholders' equity section of the 2009 December 31, balance sheet.
Alternate problem H Selected data of Ace Company for the year ended 2009 December 31, are:
Sales, net $1,000,000
Interest expense 90,000
Cash dividends on common stock 150,000
Selling and administrative expenses 245,000
Cash dividends on preferred stock 70,000
Rent revenue 400,000
Cost of goods sold 650,000
Flood loss (has never occurred before) 200,000
Interest revenue 90,000

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