(1)
Shareholders’ Equity Transactions
The claims of owners on a company’s resources, after the liabilities are paid off, are referred to as stockholders’ equity. Therefore, stockholders’ equity is sometimes referred to as net worth of owners or shareholders or stockholders.
To journalize: The events and transactions that affect the shareholders’ equity of Corporation
(1)
Explanation of Solution
Journalize the transactions related to shareholders’ equity for the period 2018through2020 for Incorporation AI.
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2018 | Cash | 480,000,000 | |||
Preferred Stock |
10,000,000 | ||||
Paid-in Capital–Excess of Par, Preferred |
470,000,000 | ||||
(To record issue of |
Table (1)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2018 | Cash | 70,000,000 | |||
Common Stock |
7,000,000 | ||||
Paid-in Capital–Excess of Par, Common |
63,000,000 | ||||
(To record issue of common stock) |
Table (2)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2018 | 1,000,000 | ||||
Cash Dividends Payable, Preferred | 1,000,000 | ||||
(To record declaration of cash dividends) |
Table (3)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2018 | |||||
Cash Dividends Payable, Preferred | 1,000,000 | ||||
Cash | 1,000,000 | ||||
(To record distribution of cash dividends) |
Table (4)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2018 | Retained Earnings | 16,000,000 | |||
Cash Dividends Payable, Common | 16,000,000 | ||||
(To record declaration of cash dividends) |
Table (5)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2018 | Cash Dividends Payable, Common | 16,000,000 | |||
Cash | 16,000,000 | ||||
(To record distribution of cash dividends) |
Table (6)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2018 | Income Summary | 290,000,000 | |||
Retained Earnings | 290,000,000 | ||||
(To record closing of net income to income summary) |
Table (7)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2019 | Common Stock (1) | 3,000,000 | |||
Paid-in Capital–Excess of Par (3) | 27,000,000 | ||||
Retained Earnings | 20,000,000 | ||||
Cash (4) | 50,000,000 | ||||
(To record retirement of common stock) |
Table (8)
Working Notes:
Compute common stock value.
Compute excess of par value of shares.
Compute paid-in capital in excess of par value.
Note: Refer to Equation (2) for values and computations of excess of par value per share.
Compute cash paid amount.
Note: Refer to Equations (1), and (3) for values and computations of common stock, and paid-in capital-excess of par value.
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2019 | |||||
Retained Earnings | 1,000,000 | ||||
Cash Dividends Payable, Preferred | 1,000,000 | ||||
(To record declaration of cash dividends) |
Table (9)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2019 | |||||
Cash Dividends Payable, Preferred | 1,000,000 | ||||
Cash | 1,000,000 | ||||
(To record distribution of cash dividends) |
Table (10)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2019 | |||||
Retained Earnings | 20,000,000 | ||||
Cash Dividends Payable, Common | 20,000,000 | ||||
(To record declaration of cash dividends) |
Table (11)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2019 | |||||
Cash Dividends Payable, Common | 20,000,000 | ||||
Cash | 20,000,000 | ||||
(To record distribution of cash dividends) |
Table (12)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2019 | |||||
Paid-in Capital–Excess of Par, Preferred | 5,000,000 | ||||
Preferred Stock | 5,000,000 | ||||
(To record distribution of stock dividend) |
Table (13)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2019 | |||||
Income Summary | 380,000,000 | ||||
Retained Earnings | 380,000,000 | ||||
(To record closing of net income to income summary) |
Table (14)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2020 | |||||
Retained Earnings | 65,000,000 | ||||
Common Stock | 6,000,000 | ||||
Paid-in Capital–Excess of Par | 59,000,000 | ||||
(To record declaration of common stock dividend) |
Table (15)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2020 | |||||
Retained Earnings | 1,000,000 | ||||
Cash Dividends Payable, Preferred | 1,000,000 | ||||
(To record declaration of cash dividends) |
Table (16)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2020 | |||||
Cash Dividends Payable, Preferred | 1,000,000 | ||||
Cash | 1,000,000 | ||||
(To record distribution of cash dividends) |
Table (17)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2020 | |||||
Retained Earnings | 22,000,000 | ||||
Cash Dividends Payable, Common | 22,000,000 | ||||
(To record declaration of cash dividends) |
Table (18)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2020 | |||||
Cash Dividends Payable, Common | 22,000,000 | ||||
Cash | 22,000,000 | ||||
(To record distribution of cash dividends) |
Table (19)
Date | Account Titles and Explanation | Post Ref. | Debit ($) | Credit ($) | |
2020 | |||||
Income Summary | 412,000,000 | ||||
Retained Earnings | 412,000,000 | ||||
(To record closing of net income to income summary) |
Table (20)
(2)
To prepare: Stockholders’ equity section of balance sheet for Incorporation IA at December 31, 2020 and 2019.
(2)
Explanation of Solution
Prepare Stockholders’ equity section of balance sheet for Incorporation IAat December 31, 2020 and 2019.
Incorporation IA | ||
Partial balance sheet (Stockholders’ Equity Section) | ||
December 31, 2020 and 2019 | ||
2020 | 2019 | |
Paid-in Capital | Amount ($) | Amount ($) |
Preferred stock | $15,000,000 | $15,000,000 |
Common stock | 65,000,000 | 59,000,000 |
Additional paid-in capital | 1,055,000,000 | 996,000,000 |
Total paid-in capital | 1,135,000,000 | 1,070,000,000 |
Retained earnings | 2,814,000,000 | 2,490,000,000 |
Total stockholders’ equity | 3,9249,000,000 | 3,560,000,000 |
Table (21)
Stockholders’ equity section: Partial balance sheet that reports the details of stockholders’ equity in detail is referred to as stockholders’ equity section of balance sheet.
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