Maurice Tutor
$15/per page/Negotiable
The following stockholders" equity section is from Bell Company"s 2008 October 31, balance sheet:
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Stockholders" equity: |
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Paid-in capital: |
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Preferred stock - $60 par value, 6%; 1,000 shares |
$21,000 |
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authorized; 350 shares issued and outstanding |
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Common stock - $6 par value; 100,000 shares |
240,000 |
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authorized; 40,000 shares issued and outstanding |
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Paid-in capital from donation of plant site |
15,000 |
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Total paid-in capital |
$276,000 |
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Retained earnings: |
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Appropriated: |
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Appropriation for contingencies |
$12,000 |
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Un appropriated |
33,300 |
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Total retained earnings |
45,300 |
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Total stockholders" equity |
$321,300 |
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During the ensuing fiscal year, Bell Company entered into the following transactions:
•The appropriation of USD 12,000 of retained earnings had been authorized in October 2008 because of the likelihood of an unfavorable court decision in a pending lawsuit. The suit was brought by a customer seeking damages for the company"s alleged breach of a contract to supply the customer with certain products at stated prices in 2007. The suit was concluded on 2009 March 6, with a court order directing the company to pay USD 10,500 in damages. These damages were not deductible in determining the income tax liability. The board ordered the damages paid and the appropriation closed. The loss does not qualify as an extraordinary item.
•The company acquired 1,000 shares of its own common stock at USD 9 in May 2009. On June 30, it reissued 500 of these shares at USD 7.20.
•Dividends declared and paid during the year were 6 percent on preferred stock and 18 cents per share on common stock. Both dividends were declared on September 1 and paid on 2009 September 30. For the fiscal year, the company had net income after income taxes of USD 11,400, excluding the loss of the lawsuit.
a. Prepare journal entries for the preceding numbered transactions.
b. Prepare a statement of retained earnings for the year ended 2009 October 31.
c. Prepare the stockholders" equity section of the 2009 October 31, balance sheet.