Task Corporation had the following stockholdersâ equity accountbalances at December 31, 20x4:
CommonStock $ 7,875,000
Paid-in Capital in Excess ofPar 15,750,000
Paid-in Capital Employee StockOptions 400,000
RetainedEarnings 16,445,000
TreasuryStock 750,000
Transactions and other information related to stockholdersâequity accounts were as follows:
As of December 31, 20x4, Trask had 4,000,000 authorized sharesof $5 par value common stock â 1,575,000 shares had been issued, ofthis 75,000 were held in the treasury. The treasury shares wereaccounted for using the cost method.
On January 1, 20x5, Trask issued 5,000 shares of $100 par value,6% cumulative preferred stock at par in exchange for legal feesvalued at $522,000.
On March 1, 20x5, Task formally retired 25,000 of the treasuryshares. The shares were originally issued for $15 per share and hadbeen reacquired on September 25, 2004 for $10 per share.
Trask owned shares of Harbor, Inc. common stock that waspurchased during 20x4 for $600,000. On March 5, 20x5, Traskdeclared a property dividend to distribute all of the Harbor sharesto common stockholders of record on April 16, 20x5. The marketvalue of the Harbor stock on March 5, 20x5 was $764,000. Theproperty dividend was distributed on April 29, 20x5.
On January 2, 20x3, Trask granted stock options to employees topurchase 200,000 shares of the companyâs common stock at $12 pershare, which was the market price on that date. The market price ofthe options on the grant date was $2 per option.The options areexercisable within a three year period, beginning January 1, 20x5.On July 1, 20x5, employees exercised 150,000 options when themarket value of the stock was $25 per share.
On October 27, 20x5, Trask declared a two-for-one stock split onits common stock and reduced the per share par value accordingly.Trask stockholders of record received one additional share for eachshare owned.
On December 12, 20x5, Trask declared the yearly cash dividend onpreferred stock, payable on January 11, 20x6.
On January 16, 20x6 before the accounting records are closed for20x5, Trask became aware of the fact that depreciation wasunderstated by $350,000 for the year ended December 31, 20x4. Theafter tax effect on net income was $245,000.
Net income for 20x5 was $2,400,000.
The average price of a share of Trask common stock was $22 pershare.
The price of a share of Trask common stock was $24 at yearend.
Required:
Prepare all journal entries required to record the aboveinformation during 20x5.
Prepare Traskâs statement of retained earnings for the yearended December 31, 20x5.
Prepare the stockholdersâ equity section of Traskâs balancesheet at December 31, 20x5.
Compute earnings per share for the year 20x5.
Task Corporation had the following stockholdersâ equity accountbalances at December 31, 20x4:
CommonStock $ 7,875,000
Paid-in Capital in Excess ofPar 15,750,000
Paid-in Capital Employee StockOptions 400,000
RetainedEarnings 16,445,000
TreasuryStock 750,000
Transactions and other information related to stockholdersâequity accounts were as follows:
As of December 31, 20x4, Trask had 4,000,000 authorized sharesof $5 par value common stock â 1,575,000 shares had been issued, ofthis 75,000 were held in the treasury. The treasury shares wereaccounted for using the cost method.
On January 1, 20x5, Trask issued 5,000 shares of $100 par value,6% cumulative preferred stock at par in exchange for legal feesvalued at $522,000.
On March 1, 20x5, Task formally retired 25,000 of the treasuryshares. The shares were originally issued for $15 per share and hadbeen reacquired on September 25, 2004 for $10 per share.
Trask owned shares of Harbor, Inc. common stock that waspurchased during 20x4 for $600,000. On March 5, 20x5, Traskdeclared a property dividend to distribute all of the Harbor sharesto common stockholders of record on April 16, 20x5. The marketvalue of the Harbor stock on March 5, 20x5 was $764,000. Theproperty dividend was distributed on April 29, 20x5.
On January 2, 20x3, Trask granted stock options to employees topurchase 200,000 shares of the companyâs common stock at $12 pershare, which was the market price on that date. The market price ofthe options on the grant date was $2 per option.The options areexercisable within a three year period, beginning January 1, 20x5.On July 1, 20x5, employees exercised 150,000 options when themarket value of the stock was $25 per share.
On October 27, 20x5, Trask declared a two-for-one stock split onits common stock and reduced the per share par value accordingly.Trask stockholders of record received one additional share for eachshare owned.
On December 12, 20x5, Trask declared the yearly cash dividend onpreferred stock, payable on January 11, 20x6.
On January 16, 20x6 before the accounting records are closed for20x5, Trask became aware of the fact that depreciation wasunderstated by $350,000 for the year ended December 31, 20x4. Theafter tax effect on net income was $245,000.
Net income for 20x5 was $2,400,000.
The average price of a share of Trask common stock was $22 pershare.
The price of a share of Trask common stock was $24 at yearend.
Required:
Prepare all journal entries required to record the aboveinformation during 20x5.
Prepare Traskâs statement of retained earnings for the yearended December 31, 20x5.
Prepare the stockholdersâ equity section of Traskâs balancesheet at December 31, 20x5.
Compute earnings per share for the year 20x5.
Related questions
On December 31, 2016, Cullumber Company had 1,275,000 shares of $5 par common stock issued and outstanding. At December 31, 2016, stockholdersâ equity had the amounts listed here.
| Common Stock | $6,375,000 | |
| Additional Paid-in Capital | 1,725,000 | |
| Retained Earnings | 1,130,000 |
Transactions during 2017 and other information related to stockholdersâ equity accounts were as follows.
| 1. | On January 10, 2017, issued at $114 per share 128,000 shares of $102 par value, 8% cumulative preferred stock. | |
| 2. | On February 8, 2017, reacquired 13,700 shares of its common stock for $14 per share. | |
| 3. | On May 9, 2017, declared the yearly cash dividend on preferred stock, payable June 10, 2017, to stockholders of record on May 31, 2017. | |
| 4. | On June 8, 2017, declared a cash dividend of $1.25 per share on the common stock outstanding, payable on July 10, 2017, to stockholders of record on July 1, 2017. | |
| 5. | Net income for the year was $3,683,000. |
Prepare the stockholdersâ equity section of Cullumber balance sheet at December 31, 2017.
At the beginning of 2015, Tyler Corporation had the followingstockholdersâ equity balances in its general ledger:
Common Stock, $10 Par Value | $2,500,000 |
Paid-In Capital in Excess of Par | 1,500,000 |
Paid-In Capital, Treasury Stock | 450,000 |
Paid-In Capital, Stock Options | 200,000 |
Retained Earnings | 5,000,000 |
Treasury Stock (15,000 shares) | (300,000) |
Total StockholdersâEquity | $9,350,000 |
The paid-in capital from stock options relates to optionsgranted on 1/1/07 to the CEO as incentive compensation. As of1/1/15, the remaining expected benefit period is four years;expense has been and will be recorded evenly over the benefitperiod.
The following events were among the many occurring in 2015:
January 2: Purchased 5,000 shares of its common stock for $16per share. Taylor uses the cost method of accounting for treasurystock transactions.
February 1: Declared and distributed a 1% stock dividend oncommon stock outstanding when the market price of the stock was $24per share.
April 1: Issued 20,000 shares of $50 par, noncumulative,convertible 6% preferred stock for $60 per share, where one shareof preferred stock is convertible into three shares of commonstock.
July 1: 2,000 shares of treasury stock that had been purchasedin a prior year for $21 per share were re-issued for $22 pershare.
August 1: Holders of 8,000 shares of the preferred stockconverted their shares into common stock when the market value ofthe common stock was $22 per share. Taylor uses the book valuemethod of accounting for conversions.
October 1: Declared and paid a cash dividend of $2 per share onthe outstanding common stock.
November 1: Corrected an error that was made several years ago,when land that had been purchased for $100,000 was inadvertentlyexpensed.
December 1: Declared and distributed a property dividend of landto preferred shareholders. The land had a fair value of $75,000 anda carrying value of $60,000.
December 31: Recorded 2015 compensation expense related to thestock options.
The 2015 Final Net Income, including the effects of any netincome items listed above (and the 2015 tax effects on net incomeitems), was $1,000,000. There were 500,000 shares authorized forboth preferred and common stock.
Required:
All journal entries for the items (a through i) above. Noexplanations. Ignore tax effects.
The 12/31/15 Stockholdersâ Equity section.
