accounting questions 19

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Problem #3 — Entries for selected corporate transactions

Bath ‘n More Inc. manufactures bathroom fixtures. The stockholders’ equity accounts of Bath ‘n More Inc., with balances on January 1, 2012, are as follows:

Common Stock, $10 stated value (600,000 shares authorized, 400,000 shares issued) $4,000,000

Paid-In Capital in Excess of Stated Value   750,000

Retained Earnings   9,150,000

Treasury Stock (40,000 shares, at cost)   600,000

The following selected transactions occurred during the year:

Jan. 4.   Paid cash dividends of $0.13 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $46,800.

Apr. 3.   Issued 75,000 shares of common stock for $1,200,000.

June 6.   Sold all of the treasury stock for $725,000.

July 1.   Declared a 4% stock dividend on common stock, to be capitalized at the market price of the stock, which is $18 per share.

Aug. 15.   Issued the certificates for the dividend declared on July 1.

Nov. 10.   Purchased 25,000 shares of treasury stock for $500,000.

Dec. 27.   Declared a $0.16-per-share dividend on common stock.

31.   Closed the credit balance of the income summary account, $950,000.

31.   Closed the two dividends accounts to Retained Earnings.


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, 2012.

4.  Prepare the Stockholders’ Equity section of the December 31, 2012, balance sheet.

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