Nav-Go Enterprises Inc. produces aeronautical navigation equipment. The stockholders’ equity accounts of

Nav-Go Enterprises Inc. produces aeronautical navigation equipment. The stockholders’ equity accounts of Nav-Go Enterprises Inc., with balances on January 1, 2014, are as follows:



Common Stock, $5 stated value (900,000 shares authorized,
620,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,100,000
Paid-In Capital in Excess of Stated Value—Common Stock . . . . . . . . . . . . 1,240,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,875,000
Treasury Stock (48,000 shares, at cost) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288,000


The following selected transactions occurred during the year:

Jan.
15. Paid cash dividends of $0.06 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $34,320.

Mar.
15. Sold all of the treasury stock for $6.75 per share.

Apr.
13. Issued 200,000 shares of common stock for $8 per share.

June
14. Declared a 3% stock dividend on common stock, to be capitalized at the market price of the stock, which is $7.50 per share.

July
16. Issued the certificates for the dividend declared on June 14.

Oct.
30. Purchased 50,000 shares of treasury stock for $6 per share.

Dec.
30. Declared a $0.08-per-share dividend on common stock.
31. Closed the credit balance of the income summary account, $775,000.
31. Closed the two dividends accounts to Retained Earnings.


Instructions

1. Enter the January 1 balances in T accounts for the stockholders’ equity accounts listed. Also prepare T accounts for the following: Paid-In Capital from Sale of Treasury Stock; Stock Dividends Distributable; Stock Dividends; Cash Dividends.

2. Journalize the entries to record the transactions, and post to the eight selected accounts.

3. Prepare a retained earnings statement for the year ended December 31, 2014.

4. Prepare the Stockholders’ Equity section of the December 31, 2014, balance sheet.


Answers:

1. and 2.
Common Stock
Jan. 1 Bal. 3,100,000
Apr. 13 1,000,000
July 16 123,000
Dec. 31 Bal. 4,223,000
Paid-In Capital in Excess of Stated Value—Common Stock
Jan. 1 Bal. 1,240,000
Apr. 13 600,000
June 14 61,500
Dec. 31 Bal. 1,901,500
Retained Earnings
Dec. 31 248,068 Jan. 1 Bal. 4,875,000
Dec. 31 775,000
Dec. 31 Bal. 5,401,932
Treasury Stock
288,000
Jan. 1 Bal. 288,000 Mar. 15
Oct. 30 300,000
Dec. 31 Bal. 300,000
Paid-In Capital from Sale of Treasury Stock
Mar. 15 36,000
Stock Dividends Distributable
July 16 123,000 June 14 123,000
Stock Dividends
June 14 184,500 Dec. 31 184,500
Cash Dividends
Dec. 30 63,568 Dec. 31 63,568




2.
Jan. 15 Cash Dividends Payable [(620,000 shares – 48,000 shares) × $0.06] 34,320
Cash 34,320
Mar. 15 Cash (48,000 shares × $6.75) 324,000
Treasury Stock (48,000 shares × $6.00) 288,000
Paid-In Capital from Sale of Treasury Stock 36,000
[48,000 shares × ($6.75 – $6.00)]
Apr. 13 Cash (200,000 shares × $8) 1,600,000
Common Stock (200,000 shares × $5) 1,000,000
Paid-In Capital in Excess of Stated Value—Common Stock 600,000
[200,000 shares × ($8 – $5)]
June 14 Stock Dividends [(620,000 shares + 200,000 shares) × 3% × $7.50] 184,500
Stock Dividends Distributable (24,600 shares × $5) 123,000
Paid-In Capital in Excess of Stated Value—Common Stock 61,500
[24,600 shares × ($7.50 – $5.00)]
July 16 Stock Dividends Distributable 123,000
Common Stock 123,000
Oct. 30 Treasury Stock (50,000 shares × $6) 300,000
Cash 300,000
Dec. 30 Cash Dividends [(620,000 shares + 200,000 shares + 24,600 shares – 63,568
50,000 shares) × $0.08]
Cash Dividends Payable 63,568
31 Income Summary 775,000
Retained Earnings 775,000
31 Retained Earnings 248,068
Stock Dividends 184,500
Cash Dividends 63,568



NAV-GO ENTERPRISES INC.
Retained Earnings Statement
For the Year Ended December 31, 2014
Retained earnings, January 1, 2014 $4,875,000
Net income $ 775,000
Less: Cash dividends (63,568)
Stock dividends (184,500)
Increase in retained earnings 526,932
Retained earnings, December 31, 2014 $5,401,932
4.
Stockholders’ Equity
Paid-in capital:
Common stock, $5 stated value (900,000 shares
authorized, 844,600 shares issued) $4,223,000
Excess of issue price over stated value 1,901,500
From sale of treasury stock 36,000
Total paid-in capital $ 6,160,500
Retained earnings 5,401,932
Total $11,562,432
Deduct treasury stock (50,000 shares at cost) 300,000
Total stockholders’ equity $11,262,432