Create a retained earnings statement for the year ended

Assignment Help Accounting Basics

Reference no: EM131926851

Problem

Nav-Go Enterprises Inc. produces aeronautical navigation equipment. The stockholders equity accounts of Nav-Go Enterprises Inc., with balances on January 1, 2010, are as follows:

Common Stock, $20 stated value (250,000 shares authorized,
175,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,500,000

Paid-In Capital in Excess of Stated Value Common Stock . . . . . . . . . . . . ..............1,750,000

Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4,600,000

Treasury Stock (40,000 shares, at cost) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....1,000,000

The following selected transactions occurred during the year:

Jan. 6. Paid cash dividends of $0.40 per share on the common stock. The dividend had

been properly recorded when declared on November 29 of the preceding fiscal year for $54,000.

Mar. 9. Sold all of the treasury stock for $1,350,000.

Apr. 3. Issued 50,000 shares of common stock for $1,700,000.

July 30. Declared a 2% stock dividend on common stock, to be capitalized at the market price of the stock, which is $36 per share.

Aug 30. Issued the certificates for the dividend declared on July 30.

Nov. 7. Purchased 25,000 shares of treasury stock for $800,000.

Dec. 30. Declared a $0.45-per-share dividend on common stock.

31. Closed the credit balance of the income summary account, $400,000.

31. Closed the two dividends accounts to Retained Earnings.

Instructions

1. Enter the January 1 balances in T accounts for the stockholders equity accounts listed.

Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock;

Stock Dividends Distributable; Stock Dividends; Cash Dividends.

2. Journalize the entries to record the transactions, and post to the eight selected accounts.

3. Prepare a retained earnings statement for the year ended December 31, 2010.

4. Prepare the Stockholders Equity section of the December 31, 2010, balance sheet.

Reference no: EM131926851

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