FINANCIAL ACCOUNTING
10th Edition
ISBN: 9781259964947
Author: Libby
Publisher: MCG
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Question
You’ve been hired to perform an audit of Hubbard Company for the year ended December 31, 2019. You find the following account balances related to shareholders’ equity:
$ 33,000 | |
Common stock, $10 par | 68,000 |
Capital surplus | (15,100) |
Retained earnings | 172,000 |
Because of the antiquated terminology and negative balance, you examine the Capital Surplus account and find the following entries:
Credit (Debit) | |
Additional paid-in capital on common stock | $ 27,700 |
Capital from donated land | 16,900 |
(5,600) | |
Additional paid-in capital on preferred stock | 2,000 |
Stock dividend (50%) | (20,000) |
Prior period adjustment (net of income taxes) | (10,100) |
Loss from fire (uninsured), 2018 | (18,100) |
Property dividend declared | (5,600) |
Cash dividends declared | (23,300) |
Balance | $ (36,100) |
Your examination of the Preferred Stock and Common Stock accounts reveals that the amounts shown correctly state the total par value of the issued capital stock. The Retained Earnings account contains the accumulated earnings of the company, with the exception of any items of retained earnings that were inappropriately debited or credited to the Capital Surplus account.
Required:
1. | Prepare whatever journal entries are necessary to eliminate the Capital Surplus account and to correct Hubbard’s shareholders’ equity accounts. |
CHART OF ACCOUNTS | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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1. Prepare a journal entry to eliminate the Capital Surplus account and to correct Hubbard’s shareholders’ equity accounts on December 31.
GENERAL JOURNAL
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