The stockholders’ equity accounts of Sigma Corporation on January 1, 2010, were as follows. Preferred Stock (8%, $100 par noncumulative, 5,000 shares authorized) $ 300,000 Common Stock ($5 stated value, 300,000 shares authorized) 1,000,000 Paid-in Capital in Excess of Par Value—Preferred Stock 15,000 Paid-in Capital in Excess of Stated Value—Common Stock 480,000 Retained Earnings 688,000 Treasury Stock—Common (5,000 shares) 40,000 During 2010 the corporation had the following transactions and events pertaining to its stockholders’ equity. Feb. 1 Issued 5,000 shares of common stock for $30,000. Mar. 20 Purchased 1,000 additional shares of common treasury stock at $7 per share. Oct. 1 Declared an 8% cash dividend on preferred stock, payable November 1. Nov. 1 Paid the dividend declared on October 1. Journalize stock transactions, post, and prepare paid-in capital section. (SO 2, 4, 7) Journalize transactions, post, and prepare a stockholders’ equity section; calculate ratios. (SO 2, 3, 5, 7, 8) (c) Tot. paid-in capital $1,766,000 Dec. 1 Declared a $0.50 per share cash dividend to common stockholders of record on December 15, payable December 31, 2010. 31 Determined that net income for the year was $280,000. Paid the dividend declared on December 1. Instructions (a) Journalize the transactions. (Include entries to close net income and dividends to Retained Earnings.) (b) Enter the beginning balances in the accounts and post the journal entries to the stockholders’ equity accounts. (Use T accounts.) (c) Prepare the stockholders’ equity section of the balance sheet at December 31, 2010. (d) Calculate the payout ratio, earnings per share, and return on common stockholders’ equity ratio. (Note: Use the common shares outstanding on January 1 and December 31 to determine the average shares outstanding.)
(a) Feb. 1 Cash 30,000
Common Stock (5,000 X $5)…………………………. 25,000
Paid-in Capital in Excess of
Stated Value—Common
Stock…………………………………………………………. 5,000
Mar. 20 Treasury Stock—Common (1,000 X $7)………………… 7,000
Cash ……………………………………………………………. 7,000
Oct. 1 Cash Dividends ($300,000 X .08)…………………………… 24,000
Dividends Payable………………………………………… 24,000
Nov. 1 Dividends Payable………………………………………………… 24,000
Cash ……………………………………………………………. 24,000
Dec. 1 Cash Dividends…………………………………………………….. 99,500
[200,000* + 5,000 – (5,000 + 1,000)] X $.50
Dividends Payable………………………………………… 99,500
Dec. 31 Income Summary…………………………………………………. 280,000
Retained Earnings……………………………………….. 280,000
31 Retained Earnings………………………………………………… 123,500
Cash Dividends ($24,000 + $99,500)………………. 123,500
31 Dividends Payable………………………………………………… 99,500
Cash ……………………………………………………………. 99,500
*$1,000,000 ÷ $5
(b)
|
Preferred Stock |
Paid-in Capital in Excess of
Par Value—Preferred Stock |
|||
| 1/1 Bal. 300,000 | 1/1 Bal. 15,000 | |||
| 12/31 Bal. 300,000 | 12/31 Bal. 15,000 | |||
|
Common Stock |
Paid-in Capital in Excess of
Stated Value—Common Stock |
|||
| 1/1 Bal. 1,000,000 | 1/1 Bal. 480,000 | |||
| 2/1 25,000 | 2/1 5,000 | |||
| 12/31 Bal. 1,025,000 | 12/31 Bal. 485,000 | |||
| Retained Earnings | Treasury Stock—Common | |||
| 12/31 123,500 | 1/1 Bal. 688,000 | 1/1 Bal. 40,000 | ||
| 12/31 280,000 | 3/20 7,000 | |||
| 12/31 Bal. 844,500 | 12/31 Bal. 47,000 | |||
| Cash Dividends | ||||
| 10/1 24,000 | ||||
| 12/1 99,500 | 12/31 123,500 | |||
| 12/31 Bal. –0– | ||||
(c) SIGMA CORPORATION
Partial Balance Sheet
December 31, 2010
Stockholders’ equity
Paid-in capital
Capital stock
8% Preferred stock, $100
par value, noncumulative,
5,000 shares authorized,
3,000 shares issued and
outstanding……………………………………………. $ 300,000
Common stock, no-par, $5
stated value, 300,000 shares
authorized, 205,000 shares
issued and 199,000 shares
outstanding……………………………………………. 1,025,000
Total capital stock……………………………. $1,325,000
Additional paid-in capital
In excess of par value—
preferred stock………………………………………. 15,000
In excess of stated value—
common stock………………………………………… 485,000
Total additional paid-in
capital…………………………………………… 500,000
Total paid-in capital…………………………. 1,825,000
Retained earnings……………………………………………………… 844,500
Total paid-in capital and
retained earnings…………………………… 2,669,500
Less: Treasury stock (6,000 common
shares) ……………………………………………………….. (47,000)
Total stockholders’ equity………………… $2,622,500
