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Business · Accounting
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Morrow Enterprises Inc. manufactures bathroom fixtures. The stockholders’ equity accounts of Morrow Enterprises Inc., with balances on January 1, 2016, are as follows:

Common stock, $20 stated value; 500,000 shares authorized, 367,000 issued $7,340,000
Paid-In Capital in Excess of Stated Value—Common Stock 844,100
Retained Earnings 33,388,000
Treasury Stock (22,800 shares, at cost) 387,600

The following selected transactions occurred during the year:

Jan. 22 Paid cash dividends of $0.09 per share on the common stock. The dividend had been properly recorded when declared on December 1 of the preceding fiscal year for $30,978.
Apr. 10 Issued 71,000 shares of common stock for $23 per share.
Jun. 6 Sold all of the treasury stock for $27 per share.
Jul. 5 Declared a 3% stock dividend on common stock, to be capitalized at the market price of the stock, which is $26 per share.
Aug. 15 Issued the certificates for the dividend declared on July 5.
Nov. 23 Purchased 28,000 shares of treasury stock for $18 per share.
Dec. 28 Declared a $0.09-per-share dividend on common stock.
31 Closed the credit balance of the income summary account, $1,131,500.
31 Closed the two dividends accounts to Retained Earnings.
Required:
A. Enter the January 1 balances in T accounts for the stockholders’ equity accounts listed.
B. Journalize the entries to record the transactions, and post to the eight selected accounts. No post ref is required in the journal. Refer to the Chart of Accounts for exact wording of account titles.
C. Prepare a retained earnings statement for the year ended December 31, 2016. Enter all amounts as positive numbers. The word “Less” is not required.*
D. Prepare the Stockholders’ Equity section of the December 31, 2016, balance sheet. “Less” or “Deduct” will automatically appear if it is required. *
* Refer to the list of Amount Descriptions provided for the exact wording of the answer choices for text entries.

Chart of Accounts

CHART OF ACCOUNTS
Morrow Enterprises Inc.
General Ledger
ASSETS
110 Cash
120 Accounts Receivable
131 Notes Receivable
132 Interest Receivable
141 Merchandise Inventory
145 Office Supplies
151 Prepaid Insurance
181 Land
193 Equipment
194 Accumulated Depreciation-Equipment
LIABILITIES
210 Accounts Payable
221 Notes Payable
226 Interest Payable
231 Cash Dividends Payable
236 Stock Dividends Distributable
241 Salaries Payable
261 Mortgage Note Payable
EQUITY
311 Common Stock
313 Paid-In Capital in Excess of Stated Value-Common Stock
315 Treasury Stock
321 Preferred Stock
322 Paid-In Capital in Excess of Par-Preferred Stock
331 Paid-In Capital from Sale of Treasury Stock
340 Retained Earnings
351 Cash Dividends
352 Stock Dividends
390 Income Summary
REVENUE
410 Sales
610 Interest Revenue
EXPENSES
510 Cost of Merchandise Sold
515 Credit Card Expense
520 Salaries Expense
531 Advertising Expense
532 Delivery Expense
533 Selling Expenses
534 Rent Expense
535 Insurance Expense
536 Office Supplies Expense
537 Organizational Expenses
562 Depreciation Expense-Equipment
590 Miscellaneous Expense
710 Interest Expense

Amount Descriptions

Amount Descriptions

Cash balance, July 31, 2016
Common stock, $20 stated value; 500,000 shares authorized, 367,000 issued
Common stock, $20 stated value; 500,000 shares authorized, 423,140 issued
Common stock, $20 stated value; 500,000 shares authorized, 451,140 issued
Decrease in retained earnings
Dividends
Excess of issue price over stated value
For the Year Ended December 31, 2016
From sale of treasury stock
Increase in retained earnings
Net income
Net loss
Retained earnings
Retained earnings, December 31, 2016
Retained earnings, January 1, 2016
Total
Total paid-in capital
Total stockholders’ equity

T Accounts

A. Enter the January 1 balances in T accounts for the stockholders’ equity accounts listed. Post the journal entries from part B to the eight selected accounts. No post ref is required in the journal.

Common Stock
Paid-In Capital in Excess of Stated Value-Common Stock
Retained Earnings
Treasury Stock
Paid-In Capital from Sale of Treasury Stock
Stock Dividends Distributable
Stock Dividends
Cash Dividends

Journal

B. Journalize the entries to record the transactions. No post ref is required in the journal. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 10

JOURNAL

DATE DESCRIPTION POST. REF. DEBIT CREDIT

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

Retained Earnings Statement

C. Prepare a retained earnings statement for the year ended December 31, 2016. Enter all amounts as positive numbers. The word “Less” is not required. Refer to the list of Amount Descriptions provided for the exact wording of the answer choices for text entries.

Morrow Enterprises

Retained Earnings Statement

For the Year Ended December 31, 2016

1

2

3

4

5

Stockholders’ Equity

D. Prepare the Stockholders’ Equity section of the December 31, 2016 balance sheet. “Less” or “Deduct” will automatically appear if it is required. Refer to the list of Amount Descriptions provided for the exact wording of the answer choices for text entries.

Stockholders’ Equity

Answer
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