For the following transactions. a. Sold 2,700 shares of $11 par value preferred
ID: 2350403 • Letter: F
Question
For the following transactions.a. Sold 2,700 shares of $11 par value preferred stock at $12.50 per share.
b. Declared the annual cash dividend of $3.8 per share on common stock. There were 8,700 shares of common stock issued and outstanding throughout the year.
c. Issued 3,400 shares of $7 par value preferred stock in exchange for a building when the market price of preferred stock was $15 per share.
d. Purchased 210 shares of preferred stock for the treasury at a price of $11.00 per share.
e. Sold 140 shares of the preferred stock held in treasury (see d) for $20 per share.
f. Declared and issued a 16% stock dividend on the $1 par value common stock when the market price per share was $48.
What will be the common stock and additional paid in capital?
Explanation / Answer
a. Sold 2,700 shares of $11 par value preferred stock at $12.50 per share. Debit: cash 33,750 (2700*12.50) Credit: Preferred stock 29,700 (2700*11) Credit: Additional paid in capital, preferred stock 4050 b. Declared the annual cash dividend of $3.8 per share on common stock. There were 8,700 shares of common stock issued and outstanding throughout the year. Debit: Retained earnings 33,060 (3.8*8700) Credit: Cash 33,060 c. Issued 3,400 shares of $7 par value preferred stock in exchange for a building when the market price of preferred stock was $15 per share. Debit: Building 51,000 (3400*15) Credit: Preferred stock 23,800 (3400*7) Credit: Additional paid in capital, preferred stock 27,200 d. Purchased 210 shares of preferred stock for the treasury at a price of $11.00 per share. Debit: Treasury stock 2,310 (210*11) Credit: Cash 2,310 e. Sold 140 shares of the preferred stock held in treasury (see d) for $20 per share. Debit: Cash 2800 (140*20) Credit: Treasury Stock 1540 (140*11) Credit: Additional paid in capital, treasury stock 1260 f. Declared and issued a 16% stock dividend on the $1 par value common stock when the market price per share was $48. Debit: Retained earnings 66,816 (8700*.16*48) Credit Common Stock 1392 (8700*.16*1) Credit: Additional paid in capital, common stock 65,424 What will be the common stock and additional paid in capital? Since it is a small stock dividend (less than 25%), retained earnings is capitalized by the market value. The amount of shares is 8700*.16 = 1392. Since the par value is $1, the common stock account gets 1*1392 = 1392. The additional paid in capital accounts gets the rest, 1392*(48-1) = 65,424
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