Question

Module 14 Accounting for Corporations Problem 13-4A -

1. Instruction

Morrow Enterprises Inc. manufactures bathroom fixtures. Thestockholders’ equity accounts of Morrow Enterprises Inc., withbalances on January 1, 2016, are as follows:

Common Stock, $20 stated value(500,000 shares authorized, 375,000 shares issued)	$7,500,000
Paid-In Capital in Excess of StatedValue—Common Stock	825,000
Retained Earnings	33,600,000
Treasury Stock (25,000 shares, atcost)	450,000

The following selected transactions occurred during theyear:

Jan.	22	Paid cash dividends of $0.08 pershare on the common stock. The dividend had been properly recordedwhen declared on December 1 of the preceding fiscal year for$28,000.
Apr.	10	Issued 75,000 shares of commonstock for $24 per share.
Jun.	6	Sold all of the treasury stock for$26 per share.
Jul.	5	Declared a 4% stock dividend oncommon stock, to be capitalized at the market price of the stock,which is $25 per share.
Aug.	15	Issued the certificates for thedividend declared on July 5.
Nov.	23	Purchased 30,000 shares of treasurystock for $19 per share.
Dec.	28	Declared a $0.10-per-share dividendon common stock.
	31	Closed the credit balance of theincome summary account, $1,125,000.
	31	Closed the two dividends accountsto Retained Earnings.

Required:

A.

Enter the January 1 balances inT accounts for the stockholders’ equity accounts listed.

B.

Journalize the entries torecord the transactions, and post to the eight selected accounts.No post ref is required in the journal. Refer to the Chart ofAccounts for exact wording of account titles.

C.

Prepare a retained earningsstatement for the year ended December 31, 2016. Enter all amountsas positive numbers. The word “Less” is not required.*

D.

Prepare the Stockholders’Equity section of the December 31, 2016, balance sheet. “Less” or“Deduct” will automatically appear if it is required. *

* Refer to the list of Amount Descriptions provided for theexact wording of the answer choices for text entries2.

2.CHART OF ACCOUNTSMorrow Enterprises Inc.General Ledger

	ASSETS
110	Cash
120	Accounts Receivable
131	Notes Receivable
132	Interest Receivable
141	Merchandise Inventory
145	Office Supplies
151	Prepaid Insurance
181	Land
193	Equipment
194	AccumulatedDepreciation-Equipment

	LIABILITIES
210	Accounts Payable
221	Notes Payable
226	Interest Payable
231	Cash Dividends Payable
236	Stock Dividends Distributable
241	Salaries Payable
261	Mortgage Note Payable

	EQUITY
311	Common Stock
313	Paid-In Capital in Excess of StatedValue-Common Stock
315	Treasury Stock
321	Preferred Stock
322	Paid-In Capital in Excess ofPar-Preferred Stock
331	Paid-In Capital from Sale ofTreasury Stock
340	Retained Earnings
351	Cash Dividends
352	Stock Dividends
390	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

EXPENSES

510

Cost of Merchandise Sold

515

Credit Card Expense

520

Salaries Expense

531

Advertising Expense

532

Delivery Expense

533

Selling Expenses

534

Rent Expense

535

Insurance Expense

536

Office Supplies Expense

537

Organizational Expenses

562

Depreciation Expense-Equipment

590

Miscellaneous Expense

710

Interest Expense

3. AmountDescriptions
Cash balance, July 31, 2016
Common stock, $20 stated value;500,000 shares authorized, 375,000 issued
Common stock, $20 stated value;500,000 shares authorized, 438,000 issued
Common stock, $20 stated value;500,000 shares authorized, 468,000 issued
Decrease in retained earnings
Dividends
Excess of issue price over statedvalue
For the Year Ended December 31,2016
From sale of treasury stock
Increase in retained earnings
Net income
Net loss
Retained earnings
Retained earnings, December 31,2016
Retained earnings, January 1,2016
Total
Total paid-in capital
Total stockholders’ equity

X

4. T Accounts:

A. Enter the January 1 balances in T accounts for thestockholders’ equity accounts listed. Post the journal entries frompart B to the eight selected accounts. No post ref is required inthe journal.

Common Stock

Paid-In Capital inExcess of Stated Value-Common Stock

Retained Earnings

Treasury Stock

Paid-In Capital fromSale of Treasury Stock

Stock DividendsDistributable

Stock Dividends

Cash Dividends

X

5. Journal

B. Journalize the entries to record the transactions. No postref is required in the journal. Refer to the Chart of Accounts forexact wording of account titles.

PAGE 10

JOURNAL

DATE

DESCRIPTION

POST.REF.

DEBIT

CREDIT

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

6.Retained Earning Statements

C. Prepare a retained earnings statement for the year endedDecember 31, 2016. Enter all amounts as positive numbers. The word“Less” is not required. Refer to the list of Amount Descriptionsprovided for the exact wording of the answer choices for textentries.

Morrow Enterprises

Retained Earnings Statement

For the Year Ended December 31, 2016

1
2
3
4
5

7. Stockholders’ Equity

D. Prepare the Stockholders’ Equity section of the December 31,2016 balance sheet. “Less” or “Deduct” will automatically appear ifit is required. Refer to the list of Amount Descriptions providedfor the exact wording of the answer choices for text entries.

Stockholders’ Equity

1	Paid-in capital:
2
3
4
5
6
7
8