Entries for selected corporate transactions Instructions

| March 29, 2017

Question
Entries for selected corporate transactions
Instructions
Morrow Enterprises Inc. manufactures bathroom fixtures. The
stockholders’ equity accounts of Morrow Enterprises Inc., with
balances on January 1, 2016, are as follows:
Common stock, $20 stated value; 500,000

$7,660,000

shares authorized, 383,000 issued
Paid­In Capital in Excess of Stated Value—

957,500

Common Stock
Retained Earnings

35,012,000

Treasury Stock (25,700 shares, at cost)

462,600

The following selected transactions occurred during the year:
Jan.

22 Paid cash dividends of $0.06 per share on the
common stock. The dividend had been properly
recorded when declared on December 1 of the
preceding fiscal year for $21,438.

Apr.

10 Issued 77,000 shares of common stock for $23

Jun.

6 Sold all of the treasury stock for $27 per share.

Jul.

5 Declared a 3% stock dividend on common

per share.

stock, to be capitalized at the market price of
the stock, which is $26 per share.
Aug.

15 Issued the certificates for the dividend declared

Nov.

23 Purchased 33,000 shares of treasury stock for

Dec.

28 Declared a $0.08­per­share dividend on

on July 5.

$20 per share.

common stock.
31 Closed the credit balance of the income
summary account, $1,196,500.
31 Closed the two dividends accounts to Retained
Earnings.
Required:
A. Enter the January 1 balances in T accounts for the
stockholders’ equity accounts listed.
B. Journalize the entries to record the transactions, and
post to the eight selected accounts. No post ref is
required in the journal. Refer to the Chart of Accounts
for exact wording of account titles.
C. Prepare a retained earnings statement for the year
ended December 31, 2016. Enter all amounts as
positive numbers. The word “Less” is not required.*
D. Prepare the Stockholders’ Equity section of the
December 31, 2016, balance sheet. “Less” or “Deduct”
will automatically appear if it is required. *
* Refer to the list of Amount Descriptions provided for
the exact wording of the answer choices for text
entries.

Chart of Accounts

Amount Descriptions

Amount Descriptions
Cash balance, July 31, 2016
Common stock, $20 stated value; 500,000 shares
authorized, 383,000 issued
Common stock, $20 stated value; 500,000 shares
authorized, 440,800 issued
Common stock, $20 stated value; 500,000 shares
authorized, 473,800 issued
Decrease in retained earnings
Dividends
Excess of issue price over stated value
For the Year Ended December 31, 2016
From sale of treasury stock
Increase in retained earnings
Net income
Net loss
Retained earnings
Retained earnings, December 31, 2016
Retained earnings, January 1, 2016
Total
Total paid­in capital
Total stockholders’ equity

T Accounts

A. Enter the January 1 balances in T accounts for the stockholders’ equity
accounts listed. Post the journal entries from part B to the eight selected
accounts. No post ref is required in the journal.

Journal

B. Journalize the entries to record the transactions. No post ref is required in the journal. Refer to the Chart of Accounts
for exact wording of account titles.

PAGE 10

JOURNAL
DATE

DESCRIPTION

POST. REF.

1
2

4

5

6

7

8

CREDIT

3

DEBIT

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Retained Earnings Statement

C. Prepare a retained earnings statement for the year ended December 31, 2016. Enter all amounts as positive
numbers. The word “Less” is not required. Refer to the list of Amount Descriptions provided for the exact wording
of the answer choices for text entries.

Morrow Enterprises
Retained Earnings Statement
For the Year Ended December 31, 2016
1

2

3
4

5

Stockholders’ Equity

D. Prepare the Stockholders’ Equity section of the December 31, 2016 balance sheet. “Less” or “Deduct” will
automatically appear if it is required. Refer to the list of Amount Descriptions provided for the exact wording of
the answer choices for text entries.

Stockholders’ Equity
1

Paid-in capital:

2

3

4
5

6

7

8

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