The stockholders' equity accounts of Castle Corporation on January 1, 2015, were as follows. Preferred Stock (8%,

Question:

The stockholders' equity accounts of Castle Corporation on January 1, 2015, were as follows.

Preferred Stock (8%, $50 par, cumulative, 10,000 shares authorized) ....$ 400,000

Common Stock ($1 stated value, 2,000,000 shares authorized) ........1,000,000

Paid-in Capital in Excess of Par—Preferred Stock ............ 100,000

Paid-in Capital in Excess of Stated Value—Common Stock ........1,450,000

Retained Earnings ..........................1,816,000

Treasury Stock (10,000 common shares) ................. 50,000

During 2015, the corporation had the following transactions and events pertaining to its stockholders’ equity.

Feb. 1 Issued 25,000 shares of common stock for $120,000.

Apr. 14 Sold 6,000 shares of treasury stock—common for $33,000.

Sept. 3 Issued 5,000 shares of common stock for a patent valued at $35,000.

Nov. 10 Purchased 1,000 shares of common stock for the treasury at a cost of $6,000.

Dec. 31 Determined that net income for the year was $452,000.

No dividends were declared during the year.


Instructions

(a) Journalize the transactions and the closing entry for net income.

(b) Enter the beginning balances in the accounts, and post the journal entries to the stockholders’ equity accounts. (Use J5 for the posting reference.)

(c) Prepare a stockholders’ equity section at December 31, 2015, including the disclosure of the preferred dividends in arrears.


Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on...
Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
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Financial Accounting

ISBN: 9781118334324

9th Edition

Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso

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