Reference no: EM131873855

Problem - Cash dividends, treasury stock, and statement of retained earnings

Context Corporation reports the following components of stockholders' equity on December 31, 2011.

Common stock-$20 par value, 100,000 shares authorized, 45,000 shares issued and outstanding $ 900,000

Paid-in capital in excess of par value, common stock 80,000

Retained earnings 430,000

Total stockholders' equity $ 1,410,000

In year 2012, the following transactions affected its stockholders' equity accounts.

Jan. 1 Purchased 4,500 shares of its own stock at $25 cash per share.

Jan. 5 Directors declared a $4 per share cash dividend payable on Feb. 28 to the Feb. 5 stockholders of record.

Feb. 28 Paid the dividend declared on January 5.

July 6 Sold 1,688 of its treasury shares at $29 cash per share.

Aug. 22 Sold 2,812 of its treasury shares at $22 cash per share.

Sept. 5 Directors declared a $4 per share cash dividend payable on October 28 to the September 25 stockholders of record.

Oct. 28 Paid the dividend declared on September 5.

Dec. 31 Closed the $408,000 credit balance (from net income) in the Income Summary account to Retained Earnings.

Required:

1. Prepare journal entries to record each of these transactions for 2012.

2. Prepare a statement of retained earnings for the year ended December 31, 2012.