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Horngren'S Financial And Managerial Accounting
Found in: Page 724

Short Answer

Journalizing dividend and treasury stock transactions, preparing a statement of retained earnings, and preparing stockholders’ equity

The balance sheet of Cullins Management Consulting, Inc. at December 31, 2017, reported the following stockholders’ equity:

Common Stock—$10 Par Value; 200,000 shares authorized, 22,000 shares issued and outstanding Paid-In Capital:


$ 220,000


Retained Earnings

Total Stockholders’ Equity $ 743,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 360,000

Total Paid-In Capital

During 2018, Cullins completed the following selected transactions:

Feb. 6 Declared a 5% stock dividend on common stock. The market value of

Cullins’s stock was $25 per share.

15 Distributed the stock dividend.

Jul. 29 Purchased 2,000 shares of treasury stock at $25 per share.

Nov. 27 Declared a $0.20 per share cash dividend on the common stock outstanding.


1. Record the transactions in the general journal.

2. Prepare a retained earnings statement for the year ended December 31, 2018. Assume Cullins’s net income for the year was $87,000.

3. Prepare the stockholders’ equity section of the balance sheet at December 31, 2018.


Stock dividend is debited; Common stock distributable and Paid- in capital in excess of par is credited.

b. Statement of Retained Earnings for the year ended December 31, 2018, is $245,820.

c. Total stockholders' equity of the company at the end of the year is $521,320

See the step by step solution

Step by Step Solution

Step 1: Journals-





Stock dividend


Common stock distributable


Paid- in capital in excess of par


To record stock dividend declared

Common stock distributable


Common stock


To record stock dividend paid



Treasury stock


To record purchase of treasury stock

Retained earnings


Common stock dividend payable


To record dividend declared

Step 2: Statement of Retained Earnings-

Statement of Retained Earnings

December 31, 2018

Retained Earnings, beginning of the year


Less: Dividend paid


Add: Net Income


Retained Earnings, ending of the year


Step 3: Balance Sheet (Partial)

Balance Sheet (Partial)

Dec 31, 2018


Amount ($)

Stockholder equity:

Common stock


Paid-in capital-Common stock


Treasury Stock


Total paid in capital


Add: Retained earnings


Total stockholders' equity


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