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P11-2A The stockholders equity accounts of Sigma Corporation on January 1, 2010, were as follows. Preferred Stock (8%, $100 par
noncumulative, 5,000 shares authorized) $ 300,000 Common Stock ($5 stated value, 300,000 shares authorized) 1,000,000 Paid-in
Capital in Excess of Par ValuePreferred Stock 15,000 Paid-in Capital in Excess of Stated ValueCommon Stock 480,000 Retained
Earnings 688,000 Treasury StockCommon (5,000 shares) 40,000 During 2010 the corporation had the following transactions and
events pertaining to its stockholders equity. Feb. 1 Issued 5,000 shares of common stock for $30,000. Mar. 20 Purchased 1,000
additional shares of common treasury stock at $7 per share. Oct. 1 Declared an 8% cash dividend on preferred stock, payable
November 1. Nov. 1 Paid the dividend declared on October 1. Journalize stock transactions, post, and prepare paid-in capital section.
(SO 2, 4, 7) Journalize transactions, post, and prepare a stockholders equity section; calculate ratios. (SO 2, 3, 5, 7, 8) (c) Tot. paid-in
capital $1,766,000 Dec. 1 Declared a $0.50 per share cash dividend to common stockholders of record on December 15, payable
December 31, 2010. 31 Determined that net income for the year was $280,000. Paid the dividend declared on December 1.
Instructions (a) Journalize the transactions. (Include entries to close net income and dividends to Retained Earnings.) (b) Enter the
beginning balances in the accounts and post the journal entries to the stockholders equity accounts. (Use T accounts.) (c) Prepare the
stockholders equity section of the balance sheet at December 31, 2010. (d) Calculate the payout ratio, earnings per share, and return
on common stockholders equity ratio. (Note: Use the common shares outstanding on January 1 and December 31 to determine the
average shares outstanding.)
(a)
Feb.
Mar.
20
Cash ....................................................................30,000
Common Stock (5,000 X $5)...............................
Paid-in Capital in Excess of
Stated ValueCommon
Stock...................................................................
Treasury StockCommon (1,000 X $7)......................
Cash ......................................................................
25,000
5,000
7,000
7,000
Oct.
24,000
24,000
Nov.
Dividends Payable.........................................................
Cash ......................................................................
24,000
24,000
Dec.
Cash Dividends..............................................................
[200,000* + 5,000 (5,000 + 1,000)] X $.50
Dividends Payable................................................
99,500
Income Summary..........................................................
Retained Earnings...............................................
280,000
Retained Earnings.........................................................
Cash Dividends ($24,000 + $99,500)......................
123,500
Dividends Payable.........................................................
Cash ......................................................................
99,500
99,500
Dec.
31
31
31
99,500
280,000
123,500
*$1,000,000 $5
(b)
Paid-in Capital in Excess of
Par ValuePreferred Stock
Preferred Stock
Common Stock
1/1 Bal.
300,000
1/1 Bal.
15,000
12/31 Bal.
300,000
12/31 Bal.
15,000
1/1 Bal.
2/1
1,000,000
25,000
1/1 Bal.
2/1
480,000
5,000
12/31 Bal.
1,025,000
12/31 Bal.
485,000
Retained Earnings
12/31
Treasury StockCommon
688,000
280,000
1/1 Bal.
3/20
40,000
7,000
844,500
12/31 Bal.
47,000
Cash Dividends
10/1
12/1
24,000
99,500 12/31
12/31 Bal.
(c)
123,500
0
SIGMA CORPORATION
Partial Balance Sheet
December 31, 2010
Stockholders equity
Paid-in capital
Capital stock
8% Preferred stock, $100
par value, noncumulative,
5,000 shares authorized,
Payout ratio =
$ 300,000
1,025,000
$1,325,000
15,000
485,000
500,000
1,825,000
844,500
2,669,500
(47,000)
$99,500
=35.5%
$280,000
$280,000 $24,000
$256,000
=
= $1.30
(195,000* + 199,000* *) 2 197,000
$2,622,500
*200,000 5,000
**205,000 6,000
$280,000 $24,000
$256,000
=
= 11.5%
a
b
($2,128,000 + $2,307,500 ) 2 $2,217,750
a