Auditing Stockholders’ Equity
You have been assigned to the audit of Belcore Inc., a manufacturing company. You have been asked to summarize the transactions for the year ended December 31, 2008, affecting stockholders’ equity and other related accounts. The Stockholders’ Equity section of Belcore’s December 31, 2007, balance sheet follows:
|
Stockholders’ Equity |
|
|
Contributed capital: |
|
|
Common stock, $2 par value, 500,000 shares authorized, |
|
|
90,000 shares issued, 88,790 shares outstanding |
$ 180,000 |
|
Paid in capital in excess of par |
1,820,000 |
|
Paid in capital from treasury stock |
22,500 |
|
Total contributed capital |
$2,022,500 |
|
Retained earnings |
324,689 |
|
Total contributed capital and retained earnings |
$2,347,189 |
|
Less: Cost of 1,210 shares of treasury stock |
72,600 |
|
Total stockholders’ equity |
$2,274,589 |
You have extracted the following information from the accounting records and audit working papers.
2008
Jan. 15 Belcore reissued 650 shares of treasury stock for $40 per share. The 1,210 shares of treasury stock on hand at December 31, 2007, were purchased in one block in 2007. Belcore used the cost method for recording the treasury shares purchased.
Feb. 2 Sold 90, $1,000, 9% bonds due February 1, 2011, at 103 with one detachable stock warrant attached to each bond. Interest is payable annually on February 1. The fair market value of the bonds without the stock warrants is 97. The detachable warrants have a fair value of $60 each and expire on February 1,
2009. Each warrant entitles the holder to purchase 10 shares of common stock at $40 per share.
Mar. 6 Subscriptions for 1,400 shares of common stock were issued at $44 per share, payable 40% down and the balance by March 20.
20 The balance due on 1,200 shares was received and those shares were issued. The subscriber who defaulted on the 200 remaining shares forfeited the down payment in accordance with the subscription agreement.
Nov. 1 There were 55 stock warrants detached from the bonds and exercised.
Instructions: Provide journal entries required to summarize the preceding transactions.