Question

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Sun Corporation received a charter that authorized the issuance of 81,000 shares of $6 par common stock and 19,000 shares of $125 par, 8 percent cumulative preferred stock. Sun Corporation completed the following transactions during its first two years of operation:

2016

Jan.	5	Sold 12,150 shares of the $6 par common stock for $8 per share.
	12	Sold 1,900 shares of the 8 percent preferred stock for $135 per share.
Apr.	5	Sold 16,200 shares of the $6 par common stock for $10 per share.
Dec.	31	During the year, earned $313,800 in cash revenue and paid $241,000 for cash operating expenses.
	31	Declared the cash dividend on the outstanding shares of preferred stock for 2016. The dividend will be paid on February 15 to stockholders of record on January 10, 2017.
	31	Closed the revenue, expense, and dividend accounts to the retained earnings account.

2017

  Feb.

15

Paid the cash dividend declared on December 31, 2016.

  Mar.

3

Sold 2,850 shares of the $125 par preferred stock for $145 per share.

  May

5

Purchased 550 shares of the common stock as treasury stock at $12 per share.

  Dec.

31

During the year, earned $247,200 in cash revenues and paid $170,900 for cash operating expenses.

31

Declared the annual dividend on the preferred stock and a $0.75 per share dividend on the common stock.

31

Closed revenue, expense, and dividend accounts to the retained earnings account.

a.

Prepare journal entries for these transactions for 2016 and 2017 and post them to T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations and final answer to the nearest dollar amount. Select "cl" for all the closing entries.)

b.	Prepare the balance sheets at December 31, 2016 and 2017. (Amounts to be deducted should be indicated with minus sign.)

Answer 1

a.

i. 2016

SUN CORPORATION
General Journal for the year ended December 31, 2016
Date	Account Title	Debit	Credit
1/5/16	Cash	97200
	Common stock		72900
	APIC - Common Stock		24300
	(Issue of 12,150 $6 par common shares @$8 per share)
1/12/16	Cash	256500
	Preferred Stock		237500
	APIC - Preferred Stock		19000
	(Issue of 1,900 shares of $125 par preferred stock @$135 per share)
4/5/16	Cash	162000
	Common stock		97200
	APIC - Common Stock		64800
	(Issue of 16,200 $10 par common shares @$6 per share)
12/31/16	Cash	313800
	Revenues		313800
	(Cash revenues for the year )
	Operating expenses	241000
	Cash		241000
	(Cash expenses for the year)
12/31/16	Dividend	19000
	Dividend Payable		19000
	(Cash dividend of 8% on $237,500 preferred stock)
12/31/16	Revenues	313800
	Operating expenses		241000
	Retained Earnings		72800
	(Revenues and expenses closed to retained earnings)
	Retained Earnings	19000
	Dividend		19000
	(Dividend account closed to retained earnings )

Cash					Common Stock
Date	Debit	Date	Credit		Date	Debit	Date	Credit
1/5/16	97200	12/31/16	241000				1/5/16	72900
1/12/16	256500						4/5/16	97200
4/5/16	162000					0		170100
12/31/16	313800						End.Bal.	170100
	829500		241000
End Bal.	588500
					APIC - Common stock
					Date	Debit	Date	Credit
Preferred Stock							1/5/16	24300
Date	Debit	Date	Credit				4/5/16	64800
		1/12/16	237500			0		89100
							End.Bal.	89100
	0		237500
		End.Bal.	237500		Revenues
					Date	Debit	Date	Credit
APIC - Preferred stock					12/31/16	313800	12/31/16	313800
Date	Debit	Date	Credit			313800		313800
		1/12/16	19000
	0		19000
		End.Bal.	19000
Operating Expenses					Dividend
Date	Debit	Date	Credit		Date	Debit	Date	Credit
12/31/16	241000	12/31/16	241000		12/31/16	19000	12/31/16	19000
	241000		241000			19000		19000
Dividend Payable					Retained Earnings
Date	Debit	Date	Credit		Date	Debit	Date	Credit
		12/31/16	19000		12/31/16	241000	12/31/16	313800
					12/31/16	19000
	0		19000			260000		313800
		End.Bal.	19000				End.Bal.	53800

a.ii.

SUN CORPORATION
General Journal for the year ended December 31, 2017
Date	Account Title	Debit	Credit
2/15/17	Dividend Payable	19000
	Cash		19000
	(Cash dividend paid to preferred shareholders)
3/3/17	Cash	413250
	Preferred Stock		356250
	APIC - Preferred Stock		57000
	(Issue of 2,850 shares of $125 par preferred stock @$145 per share)
5/5/17	Treasury stock	6600
	Cash		6600
	(Purchase of 550 shares of own stock @$12 per share)		64800
12/31/16	Cash	247200
	Revenues		247200
	(Cash revenues for the year )
	Operating expenses	170900
	Cash		170900
	(Cash expenses for the year)
12/31/16	Dividend	47500
	Dividend Payable		47500
	(Cash dividend of 8% on $593,750 preferred stock)
	Dividend	20850
	Dividend Payable		20850
	(Cash dividend @$0.75 per share on 27,800 shares of common stock)
12/31/16	Revenues	247200
	Operating expenses		170900
	Retained Earnings		76300
	(Revenues and expenses closed to retained earnings)
	Retained Earnings	68350
	Dividend		38350
	(Dividend account closed to retained earnings 0

Cash					Common Stock
Date	Debit	Date	Credit		Date	Debit	Date	Credit
Beg.Bal.	588500	2/15/17	19000				Beg.Bal.	72900
3/3/17	413250	5/5/17	6600
12/31/17	247200	12/31/17	170900			0		72900
							End.Bal.	72900
	1248950		196500
End Bal.	1052450
					APIC - Common stock
					Date	Debit	Date	Credit
Preferred Stock							Beg.Bal.	24300
Date	Debit	Date	Credit
		Beg.Bal.	237500			0		24300
		3/3/17	356250				End.Bal.	24300
	0		593750
		End.Bal.	593750		Revenues
					Date	Debit	Date	Credit
APIC - Preferred stock					12/31/17		12/31/17	247200
Date	Debit	Date	Credit			0		247200
		Beg.Bal.	19000
		3/3/17	57000
	0		76000
		End.Bal.	76000		Dividend
					Date	Debit	Date	Credit
Operating Expenses					12/31/17	47500	12/31/17	68350
Date	Debit	Date	Credit		12/31/17	20850
12/31/17	170900	12/31/17	170900			68350		68350
	170900		170900
Dividend Payable					Retained Earnings
Date	Debit	Date	Credit		Date	Debit	Date	Credit
2/15/17	19000	Beg.Bal.	19000		12/31/17	170900	Beg.Bal.	53800
		12/31/17	47500		12/31/17	68350	12/31/17	247200
		12/31/17	20850			239250		301000
	19000		87350				End.Bal.	61750
		End.bal.	68350
Treasury Stock
Date	Debit	Date	Credit
5/5/17	6600
	6600		0

b.i.

SUN CORPORATION
Balance Sheet
December 31, 2016
Assets
Cash	588500
Total Assets	588500
Liabilities and stockholders'quity
Dividend Payable	19000
Common stock	170100
Preferred Stock	237500
Paid-in-Capital in excess of par, Common Stock	89100
Paid-in-Capital in excess of par, Preferred Stock	19000
Retained Earnings	53800
Total stockholders' Equity	569500
Total liabilities and stockholders' equity	588500

b.ii.

SUN CORPORATION
Balance Sheet
December 31, 2016
Assets
Cash	1052450
Total Assets	1052450
Liabilities and stockholders'quity
Dividend Payable	68350
Common stock	170100
Preferred Stock	593750
Paid-in-Capital in excess of par, Common Stock	89100
Paid-in-Capital in excess of par, Preferred Stock	76000
Retained Earnings	61750
Treasury Stock	-6600
Total stockholders' Equity	984100
Total liabilities and stockholders' equity	1052450