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At the beginning of 2018, Thompson Service, Inc., showed the following amounts in the stock-

At the beginning of 2018, Thompson Service, Inc., showed the following amounts in the stock-

At the beginning of 2018, Thompson Service, Inc., showed the following amounts in the stock-
holders' 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……………………….   4,202,000
  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 February 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.


June1 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 of the year 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.


  1. Prepare in general journal form the entries to record these transactions.

  2. Prepare the stockholders' equity section of the balance sheet at December 31, 2018. Include a supporting schedule showing your computation.
    of retained earnings at that date.
    Instructions
    c. Compute the maximum cash dividend per share that legally could be declared at December
    31, 2018, 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.)

 

 

 
manish jayant 09-Sep-2020

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