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M7.2 Assignment
· Problem 12.6A
· Problem C8
· Problem C9
Remember to show all calculations. If you do not show how you a
ived at your answers, no credit will be received
General Instructions for Written Assignments
Please only submit one Excel file with all problems included. Submit an Excel file, PLEASE USE ONE WORKSHEET AND EACH PROBLEM GOES ON SEPARATE TABS.
· Problem 12.6A
Recording Stock Dividends and Treasury Stock Transactions
At the beginning of 2021, Thompson Service, Inc., showed the following amounts in the stockholders’ equity section of its balance sheet.
Stockholders’ equity:    
Capital stock, $1 par value, 500,000 shares authorized, 382,000 issued and outstanding     $  382,000
Additional paid-in capital: capital stock      XXXXXXXXXX4,202,000
Total paid-in capital     $4,584,000
Retained earnings      2,704,600
Total stockholders’ equity     $7,288,600
The transactions relating to stockholders’ equity during the year are as follows.
Jan. 3    Declared a dividend of $1 per share to stockholders of record on January 31, payable on Fe
uary 15.
Feb. 15    Paid the cash dividend declared on January 3.
Apr. 12    The corporation purchased 6,000 shares of its own capital stock at a price of $40 per share.
May  9    Reissued 4,000 shares of the treasury stock at a price of $44 per share.
June  1    Declared a 5 percent stock dividend to stockholders of record at June 15, to be distributed on June 30. The market price of the stock at June 1 was $42 per share. (The 2,000 shares remaining in the treasury do not participate in the stock dividend.)
June 30    Distributed the stock dividend declared on June 1.
Aug.  4    Reissued 600 of the 2,000 remaining shares of treasury stock at a price of $37 per share.
Dec. 31    The Income Summary account, showing net income for the year of $1,928,000, was closed into the Retained Earnings account.
Dec. 31    The $382,000 balance in the Dividends account was closed into the Retained Earnings account.
Instructions
a. Prepare in general journal form the entries to record these transactions.
. Prepare the stockholders’ equity section of the balance sheet at December 31, 2021. Use the format illustrated in Exhibit 12–6. Include a supporting schedule showing your computation of retained earnings at that date.
C. Compute the maximum cash dividend per share that legally could be declared at December 31, 2021, without impairing the paid-in capital of Thompson Service. (Hint: The availability of retained earnings for dividends is restricted by the cost of treasury stock owned.)
· Problem C8
Comparison of Proprietorship with Corporation
S & X Co. is a retail store owned solely by Joe Saunder. During the month of November, the equity accounts were affected by the following events.
Nov. 9    Saunder invested an additional $15,000 in the business.
Nov. 15     Saunder withdrew $1,500 for his salary for the first two weeks of the month.
Nov. 30    Saunder withdrew $1,500 for his salary for the second two weeks of the month.
Nov. 30    S & X distributed $1,000 of earnings to Saunder.
page C-25
Instructions:
Assuming that the business is organized as a sole proprietorship:
Prepare the journal entries to record these events in the accounts of S & X.
Prepare the closing entries for the month of November. Assume that after closing all of the revenue and expense accounts the Income Summary account has a credit balance of $5,000.
Hint: Record the investment in a separate capital account and the withdrawals (salary) in a separate drawing account. Close the drawing account into the capital account as part of the closing entries.
Assuming that the business is organized as a corporation:
Prepare the journal entries to record these events in the accounts of S & X. Assume that the distribution of earnings on November 30 was payment of a dividend that was declared on November 20.
Prepare the closing entries for the month of November. Assume that after closing all of the revenue credit and expense accounts (except Income Tax Expense) the Income Summary account has a credit balance of $2,000. Before preparing the closing entries, prepare the entries to accrue income tax expense for the month and to close the Income Tax Expense account to the Income Summary account. Assume that the corporate income tax rate is 30 percent.
Explain the causes of the differences in net income between S & X as a sole proprietorship and S & X as a corporation.
Describe the effects of the business operations on Saunder’s individual income tax return, assuming that the business is organized as (1) a sole proprietorship and (2) a corporation.
· Problem C9
Formation of a Partnership
The partnership of Avery and Kirk was formed on July 1, when George Avery and Dinah Kirk agreed to invest equal amounts and to share profits and losses equally. The investment by Avery consists of $30,000 cash and an inventory of merchandise valued at $56,000.
Kirk also is to contribute a total of $86,000. However, it is agreed that her contribution will consist of the transfer of both the assets of her business and its liabilities (listed as follows). A list of the agreed values of the various items as well as their ca
ying values on Kirk’s records follows. Kirk also contributes enough cash to
ing her capital account to $86,000.
     XXXXXXXXXXInvestment by Kirk
    
XXXXXXXXXXBalances on Kirk’s Records     Agreed
XXXXXXXXXXValue
Accounts Receivable     $81,680 $79,600
Inventory       11,400      XXXXXXXXXX,800
Office Equipment (net)     XXXXXXXXXX14,300      XXXXXXXXXX,000
Accounts Payable      XXXXXXXXXX24,800      XXXXXXXXXX,800
Instructions:
A.Draft entries (in general journal form) to record the investments of Avery and Kirk in the new partnership.
C. Prepare the beginning balance sheet of the partnership (in report form) at the close of business July 1, reflecting these transfers to the firm.
D. On the following June 30 after one year of operation, the Income Summary account showed a credit balance of $74,000, and the Drawing account for each partner showed a debit balance of $31,000. Prepare journal entries to close the Income Summary account and the Drawing accounts at June 30.

M7.2 Assignment
· Problem 12.6A
· Problem C8
· Problem C9
Remember to show all calculations. If you do not show how you a
ived at your answers, no credit will be received
General Instructions for Written Assignments
Please only submit one Excel file with all problems included. Submit an Excel file, PLEASE USE ONE WORKSHEET AND EACH PROBLEM GOES ON SEPARATE TABS.
· Problem 12.6A
Recording Stock Dividends and Treasury Stock Transactions
At the beginning of 2021, Thompson Service, Inc., showed the following amounts in the stockholders’ equity section of its balance sheet.
Stockholders’ equity:    
Capital stock, $1 par value, 500,000 shares authorized, 382,000 issued and outstanding     $  382,000
Additional paid-in capital: capital stock      XXXXXXXXXX4,202,000
Total paid-in capital     $4,584,000
Retained earnings      2,704,600
Total stockholders’ equity     $7,288,600
The transactions relating to stockholders’ equity during the year are as follows.
Jan. 3    Declared a dividend of $1 per share to stockholders of record on January
Answered 4 days After Apr 02, 2024

Solution

Khushboo answered on Apr 06 2024
6 Votes
12.6A
        Date    Particulars    Debit    Credit
        Jan-03    Dividends    382,000
            Dividends payable        382,000
            (To record decaration of dividend of $1 per share)
        Feb-15    Dividends payable    382,000
            Cash        382,000
            (To record payment of dividend)
        Apr-12    Trasury stock    240,000
            Cash        240,000
            (Purchased 6000 treasury stock @40)
        May-09    Cash    176,000
            Treasury stock        160,000
            Additional paid in stock: Treasury stock        16,000
            (Sold 4000 treasury stock cost at $160000 @44 per share)
        Jun-01    Retained earnings    798,000
            Stock dividend        19,000
            Additional paid in capital- stock dividend        779,000
            (Declared 5% stock dividend (19000 shares) on 380000 shares and $42 per share)
        Jun-30    Stock dividend    19,000
            Capital stock        19,000
            (Issued stock dividend as 19000 shares of 5% stock)
        Aug-04    Cash    22,200
            Additional paid in capital- Treasury stock    1,800
            Treasury stock        24,000
            (Sold 600 shares of treasury stock at cost of $24000 @37 per share)
        Dec-31    Income summary    1,928,000
            Retained earnings        1,928,000
            (to close income summary account for the year)
        Dec-31    Retained earnings     382,000
            Dividends        382,000
            (To close dividend account)
        Part B
            Thomson Service
            Partial Balance Sheet
            December 31, 2021
            Stockholders equity
            Capital stock, $1 par value, 500000 authorized shares
            401000 shares issued (1400 shares held in treasury)        401,000
            Additional paid in capital:
            From issuance of stock    4,202,000
            From stock dividend    779,000
            From treasury stock    14,200    4,995,200
            Total paid in capital        5,396,200
            Retained earnings        3,452,600
            Less: Treasury stock...
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