Reference no: EM131813349

Problem - In year 2016, the following transactions affected its stockholders' equity accounts.

Jan. 1 Purchased 5,000 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 1,875 of its treasury shares at $29 cash per share.

Aug. 22 Sold 3,125 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 $388,000 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 2016.

Journal Entry Worksheet

• Record the purchase of 5,000 shares of its own common stock for $25 cash per share.
• Record the declaration of a cash dividend of $4 per share.
• Record the payment of the cash dividend.
• Record the reissue of 1,875 shares of the treasury stock for $29 cash per share.
• Record the reissue of 3,125 shares of the treasury stock for $22 cash per share.
• Record the declaration of a cash dividend of $4 per share.
• Record the payment of the cash dividend.
• Record the entry to close the income summary account having a credit balance of $388,000.

2. Prepare a statement of retained earnings for the year ended December 31, 2016.

3. Prepare the stockholders' equity section of the company's balance sheet as of December 31, 2016.