Reporting Components of Shareholders’ Equity: Prepare a stockholders’ equity section as of the close of business on December 31, 20X4.

Assignment Choice #2: Reporting Components of Shareholders’ Equity

Complete the following exercise. Fill in the Excel spreadsheet provided via the link below to provide your answers to parts 1 and 2. Context Corporation reports the following components of shareholders’ equity on December 31, 20X4. Then paste the Excel data into a Word document on which you can also write the answer to part 3.

<general journal.xls>

Context Corporation reports the following components of shareholders’ equity on December 31, 20X3:

Common stock – $10 par value; 50,000 shares authorized

20,000 shares issued and outstanding………………….. $200,000

Paid-in capital in excess of par value, common stock……. $30,000

Retained earnings…………………………………….$135,000

In the year 20X4, the following transactions affected its shareholders’ equity accounts:

January 1: Purchased 2,000 shares of its own stock at $20.00 cash per share.

January 5: Directors declared a $2.00 per share dividend payable on February 28 to the February 5 shareholders of record.

February 28: Paid dividend declared on January 5.

July 6: Sold 750 off its treasury shares at $17.00 cash per share. This sale is part of the January 1 purchase at $20.00 per share).

September 5: Directors declared a $2.00 per share cash dividend payable on October 28 to the September 25 shareholders of record.

October 28: Paid the dividend declared on September 5.

December 31: Closed the $194,000 credit balance from net income of December 31, 20X4, in the income summary account to retained earnings.

Required:

  1. Prepare all general journal entries to record the selected transactions.
  2. Prepare a stockholders’ equity section as of the close of business on December 31, 20X4.
  3. Provide a rationale between 200 and 300 words in length for buying. or not buying this stock based on the financial information presented.
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