Chapter 11 Stockholders’ Equity ( Extra Credit Practice ) Answer Key

On January 1, 2000, the accounts of X Corporation showed the following :

Common Stock, par $ 2, authorized 100,000 shares $ 50,000
Additional Paid In capital 100,000
Retained Earnings 20,000

Net Income for 2000 was $ 15,000

During 2000, the following transactions affecting stockholders’equity occurred in the order given :
i. issued a 10 % stock dividend. Market value of the stock on that day was $ 12 /share
ii. purchased treasury shares, 500 shares for $ 5,000 @ $ 10 /share
iii. resold 400 shares of the treasury shares purchased earlier at $ 15/share

A. Prepare journal entries for (i) to (iv) in the space provided below :

i. Retained earnings $ 30,000 ( 0.10 x 25,000 o/s shares x $ 12/sh )

Common Stock @ par $ 5,000 ( 2500 shares x $2 )
APIC, Common Stock $ 25,000
ii.
Treasury Stock $ 5,000 ( 500 sh x $ 10/sh )
Cash $ 5,000
iii.
Cash $ 6,000 ( 400 sh x $ 15/sh )
Treasury Stock $ 4,000 ( 400 x $ 10/sh @ cost )
APIC, Treasury Stock $ 2,000

B. Complete the blanks for the Stockholders’Equity section of Y Company’s balance sheet @ 12/31/00

Common Stock, par $ 2, authorized shares 100,000, shares issued 27,500

shares outstanding, 27,400 $ 55,000 ( # sh issued x par )
Additional paid-in capital, common stock $ 125,000 ($100,00 + 25,000 )
Additional paid-in capital, treasury stock $ 2,000 ( see iii )
Total Paid In Capital $ 182,000

Retained Earnings ( Beg. $ 20,000 + NI 15,000 – div 30,000) $ 5,000

Treasury Stock, shares 100 ( $ 1,000 )
Total Stockholders’Equity $ 186,000
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