Question

On December 31, 2016, Crane Company had 1,315,000 shares of $6 par common stock issued and outstanding. At December 31, 2016, stockholders’ equity had the amounts listed here.

Common Stock		$7,890,000
Additional Paid-in Capital		1,905,000
Retained Earnings		1,210,000

Transactions during 2017 and other information related to stockholders’ equity accounts were as follows.

1.		On January 10, 2017, issued at $114 per share 130,000 shares of $104 par value, 7% cumulative preferred stock.
2.		On February 8, 2017, reacquired 10,400 shares of its common stock for $12 per share.
3.		On May 9, 2017, declared the yearly cash dividend on preferred stock, payable June 10, 2017, to stockholders of record on May 31, 2017.
4.		On June 8, 2017, declared a cash dividend of $1.70 per share on the common stock outstanding, payable on July 10, 2017, to stockholders of record on July 1, 2017.
5.		Net income for the year was $3,583,000.

Prepare the stockholders’ equity section of Crane balance sheet at December 31, 2017.

Answer 1

Shareholder's Equity Section	Amount
Common stock	7,890,000
7%, Preferred stock	13,520,000
Additional paid in capital	1,905,000
APIC- Preferred stock	1,300,000
Retained earnings	1,628,780
Less: Treasury stock	(124,800)
Total	26,118,980

1. Cash Dr, 14,820,000

To 7% preferred share capital 13,520,000

To APIC- Preferred stock 1,300,000

2. Treasury Stock Dr. 124,800

To Cash 124,800

3. (a) Retained earnings Dr. 946,400

To Dividend payable 946,400 [13,520,000 x 7%]

(b) Dividend payable 946,400

To cash 946,400

4. (a) Retained earnings Dr. 2,217,820 [(1,315,000 - 10,400) x 1.70]

To dividend payable 2,217,820

(b) Dividend payable Dr. 2,217,820

To cash 2,217,820

5. Income summary Dr. 3,583,000

To retained earnings 3,583,000