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Choctaw Co
Choctaw Co. completed the following transactions in 2018, the first year of operation:
1. Issued 24,000 shares of $10 par common stock for $10 per share. 2. Issued 3,400 shares of $20 stated value preferred stock for $20 per share. 3. Purchased 1,400 shares of common stock as treasury stock for $12 per share. 4. Declared a $2,400 cash dividend on preferred stock. 5. Sold 800 shares of treasury stock for $14 per share. 6. Paid $2,400 cash for the preferred dividend declared in Event 4. 7. Earned cash revenues of $86,000 and incurred cash expenses of $45,000. 8. Appropriated $8,400 of retained earnings.
Required a. Organize the transaction in accounts under an accounting equation. b. Prepare the stockholders' equity section of the balance sheet as of December 31, 2018.
Expert Solution
| Choctaw Co. | ||||||||||||||||
| Accounting Equation for the Year 2018 | ||||||||||||||||
| Event | Assets | = | Liabilities | Stockholders' Equity | Accounting Title Retained Earnings | |||||||||||
| Cash | = | Dividends | + | Preferred | + | Common Stock | + | Paid-in Capital In Excess Treasury Stock | - | Treasury Stock | + | Retained Earnings | + | Appropriated Retained Earnings | ||
| Payable | Stock | |||||||||||||||
| 1 | 240000 | = | + | + | 240000 | + | - | + | + | NA | ||||||
| 2 | 68000 | = | + | 68000 | + | + | - | + | + | NA | ||||||
| 3 | -16800 | = | + | + | + | - | 16800 | + | + | NA | ||||||
| 4 | = | 2400 | + | + | + | - | + | -2400 | + | Dividends | ||||||
| 5 | 11200 | = | + | + | + | 1600 | - | -9600 | + | + | NA | |||||
| 6 | -2400 | = | -2400 | + | + | + | - | + | + | NA | ||||||
| 7a. | 86000 | = | + | + | + | - | + | 86000 | + | Revenues | ||||||
| 7b. | -45000 | = | + | + | + | - | + | -45000 | + | Expenses | ||||||
| 8 | = | + | + | + | - | + | -8400 | + | 8400 | Appropriated retained earnings | ||||||
| Totals | 341000 | = | 0 | + | 68000 | + | 240000 | + | 1600 | - | 7200 | + | 30200 | + | 8400 | |
b)
| CHOCTAW CO. | ||
| As of December 31, 2018 | ||
| Stockholders' equity | ||
| Preferred stock | 68000 | |
| Common stock | 240000 | |
| Paid-in Capital Treasury stock | 1600 | |
| Total Paid-In Capital | 309600 | |
| Retained Earnings | ||
| Unappropriated | 30200 | |
| Appropriated | 8400 | |
| Total Retained Earnings | 38600 | |
| Less: Treasury stock | -7200 | |
| Total Stockholders' Equity | 341000 | |
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