Question

The stockholders’ equity accounts of Martinez Corporation on January 1, 2020, were as follows:

Preferred Stock (8%, $52 par, 10,000 shares authorized) $416,000
Common Stock ($1 stated value, 2,100,000 shares authorized) 1,450,000
Paid-in Capital in Excess of Par—Preferred Stock 110,000
Paid-in Capital in Excess of Stated Value—Common Stock 1,400,000
Retained Earnings 1,850,000
Treasury Stock (11,000 common shares) 55,000
During 2020, the corporation had the following transactions and events pertaining to its stockholders’ equity.
Feb. 1 Issued 26,000 shares of common stock for $116,000.
Apr. 14 Sold 5,500 shares of treasury stock—common for $33,900.
Sept. 3 Issued 4,800 shares of common stock for a patent valued at $34,100.
Nov. 10 Purchased 1,000 shares of common stock for the treasury at a cost of $5,700.
Dec. 31 Determined that net income for the year was $465,000.
No dividends were declared during the year.
A. Journalize the transactions and the closing entry for net income.
B. Enter the beginning balances in the accounts, and post the journal entries to the stockholders’ equity accounts.
C. Prepare a stockholders’ equity section at December 31, 2017.

Answer 1

A)

Feb. 1 Issued 26,000 shares of common stock for $116,000.

Dr Cash 116,000

Cr Common stocks 26,000

Cr Paid-in capital in excess of stated value - common stock 90,000

Apr. 14 Sold 5,500 shares of treasury stock—common for $33,900.

Dr Cash 33,900

Cr Treasury stocks 27,500

Cr Paid-in capital in excess of stated value - common stock 6,400

Sept. 3 Issued 4,800 shares of common stock for a patent valued at $34,100.

Dr Patent 34,100

Cr Common stocks 4,800

Cr Paid-in capital in excess of stated value - common stock 29,300

Nov. 10 Purchased 1,000 shares of common stock for the treasury at a cost of $5,700.

Dr Treasury stock 5,700

Cr Cash 5,700

Dec. 31 Determined that net income for the year was $465,000.

Dr Income summary 465,000

Cr Retained earnings 465,000

B)

Preferred Stock $416,000

Common Stock $1,480,800

Paid-in Capital in Excess of Par - Preferred Stock $110,000

Paid-in Capital in Excess of Stated Value - Common Stock $1,525,700

Retained Earnings $2,315,000

Treasury Stock $33,200

C)

Stockholders' Equity

Preferred 8% Stock, $52 par value

(10,000 stocks authorized) $416,000

Paid-in Capital in Excess of Par $110,000 $526,000

Common Stock

(2,100,000 stocks authorized) $1,480,800

Paid-in Capital in Excess of Par $1,525,700 $3,006,500

Total paid in capital $3,532,500

Retained Earnings $2,315,000

Treasury Stock (6,500 stocks at cost) ($33,200)

Total Stockholders' Equity $5,814,300