Case Study: Alex Corporation reports the following components of stockholders` equity at December 31 of the prior year.
Common stock-$25 par value, 50,000 shares authorized, 30,000 shares issued and outstanding
Paid-in capital in excess of par value, common stock 50,000
Retained earnings 340,000
Total stockholders` equity
$ 750,000
During the current year, the following transactions affected its stockholders` equity accounts.
Jan. 2 Purchased 3,000 shares of its own stock at $25 cash per share.
Jan. 7 Directors declared a $1.50 per share cash dividend payable on
February 28 to the February 9 stockholders of record.
Feb. 28 Paid the dividend declared on January 7.
July 9 Sold 1,200 of its treasury shares at $30 cash per share.
Aug. 27 Sold 1,500 of its treasury shares at $21 cash per share.
Sep. 9 Directors declared a $2 per share cash dividend payable on October 22 to the September 23 stockholders of record.
Oct. 22 Paid the dividend declared on September 9.
Dec. 31 Closed the $52,000 credit balance (from net income) in the Income Summary account to Retained Earnings
Required:
- Prepare journal entries to record each of these transactions.
- Prepare a statement of retained earnings for the current ear ended December 31
- Prepare the stockholders` equity section of the balance sheet as of December 31 of the current year.
