Question

On January 1, 2014, GOT Company had Common Stock of 800,000 authorized shares with P20 par value. The Stockholders' Equity accounts on January 1, 2014 had the following balances:

Common Stock - P2,000,000
Additional Paid-in Capital - P600,000 Retained Earnings - P1,200,000
Transactions during the year and other information relating to shareholders' equity accounts were:
1. On January 5, GOT issued at P54 per share, 10,000 preferred stock with P50 par value and 9% cumulative. GOT had 400,000 authorized preferred shares.
2. On February 1, GOT reacquired 10,000 common shares at P32 per share.
3. On April 30, GOT sold 25,000 common stock at P34 per share. 4. On June 18, GOT declared a cash dividend of P2 per common stock, payable on July 12, to shareholders of record on July 1.
5. On November 19, GOT sold 5,000 shares of treasury for P42 per share.
6. On December 15, GOT declared a yearly cash dividend on preferred stock, payable on January 14, 2015 on shareholders of record on December 31, 2014.
7. Net income for the year was P800,000
8. GOT appropriated earnings equal to the cost of treasury shares.
Determine the balances of the following accounts on December 31, 2014.
a.) Treasury Stock
b.) Retained Earnings
c.) Shareholder's Equity

Answer 1

The balance for Treasury Stock on December 31, 2014 is P320,000. Final balances for Retained Earnings and Shareholder's Equity cannot be calculated without additional data on the preferred dividends and the appropriation for treasury stock. These accounts require transaction-specific details for an accurate calculation.

Step-by-step explanation:

Calculations for Stock Transactions and Equity Accounts

To calculate the balances of the Treasury Stock, Retained Earnings, and Shareholder's Equity accounts for GOT Company on December 31, 2014, we must analyze each given transaction:

1. Reacquired shares: On February 1, GOT reacquired 10,000 common shares at P32 per share, which gives us Treasury Stock of P320,000 (10,000 shares * P32).
2. Dividends on common stock: The total dividends to be subtracted from Retained Earnings for the common stock issued would be P2 per share * 25,000 shares = P50,000.
3. Sale of treasury shares: Got sold 5,000 shares of treasury stock for P42 per share but this does not affect the value of the Treasury stock as compared to its cost.
4. Declared preferred stock dividend: This does not affect the Treasury Stock but would decrease Retained Earnings depending on the amount declared.
5. Net income and appropriation: Net income for the year was P800,000, and earnings appropriated for treasury stock would be the cost of the treasury stock.

Taking all the transactions into account, the balance for Treasury Stock remains at P320,000 as there were no further transactions affecting this account. The Retained Earnings are affected by the net income, the dividends paid, and any appropriation of earnings. However, specifics of the preferred dividends and earnings appropriation are not given, hence a detailed calculation cannot be provided. The total Shareholder's Equity would be the sum of the ending balances of Common Stock, which is unchanged and not affected by the transactions of the year, Additional Paid-in Capital, the adjusted Retained Earnings, and the subtraction of Treasury Stock from these