Reference no: EM131920488

Problem

The Moon Company received a charter from the state of Texas giving the company authorization to issue 5,000,000 shares of $0.25 par common stock and 500,000 shares of $40 par 6% cumulative preferred stock. The following transactions occurred in 2016.

a.The company sold 200,000 shares of common stock for cash of $8/share.

b.The company sold 1,000 shares of preferred stock for cash of $41/share.

c.The company purchased 10,000 shares of previously issued common stock. The company paid $9 per share.

d.The company reissued 3,000 of the shares purchased in #3 for $10 per share.

e.The company reissued 2,000 shares purchased in #3 for $8 each.

f.The company purchased for $41.50 per share and immediately retired 100 shares of previously issued preferred stock. (See #2)

g.The company recorded an unrealized holding loss on AFS investments, $5,000.

h.The company declared the stated dividend to preferred stock (500,000 shares authorized, 900 shares issued and outstanding). The date of payment is January 4, 2017.

i.The company declared a $.10 per share cash dividend to common shareholders (200,000 shares issued, 5,000 shares held in treasury). The date of payment is January 8, 2017.

j.After closing the revenues and expenses, the Income Summary account has a credit balance of $250,000. Close Income Summary.

Required:

1. Prepare journal entries for each of the above in the journal pages provided.

2. Prepare the statement of shareholders' equity for 2016 on the page provided.

3. Prepare the shareholders' equity section of the December 31, 2016 balance sheet on the page provided. Include all information normally presented in the balance sheet related to shareholders' equity accounts.