Reference no: EM131781721

Question - On January 1, 2010, Agassi Corporation had the following stockholders' equity accounts:

Common Stock ($10 par value, 60,000 shares issued and outstanding) $600,000

Paid-in Capital in Excess of Par Value 500,000

Retained Earnings 620,000

During 2010, the following transactions occurred:

Jan. 15 Declared and paid a $1.05 cash dividend per share to stockholders.

Apr. 15 Declared and paid a 10% stock dividend. The market price of the stock was $14 per share.

May 15 Reacquired 2,000 common shares at a market price of $15 per share.

Nov. 15 Reissued 1,000 shares held in treasury at a price of $18 per share.

Dec. 31 Determined that net income for the year was $370,000.

Accounting

Journalize the above transactions. (Include entries to close net income to Retained Earnings.) Determine the ending balances for Paid-in Capital, Retained Earnings, and Stockholders' Equity.

Analysis

Calculate the payout ratio and the return on common stock equity ratio.

Principles

R. Federer is examining Agassi's financial statements and wonders whether the gains or losses on Agassis treasury stock transactions should be included in income for the year. Briefly explain whether, and the conceptual reasons why, gains or losses on treasury stock transactions should be recorded in income.