Accounting 232, Edition 24, PR13-3A page 616 The following selected accounts app

Question

Accounting 232, Edition 24, PR13-3A page 616 The following selected accounts appear in the ledger of Patton Environmental Inc. on July 1, 2012, the beingging of the current fiscal year: Preferred 2% stock, $75 par (40,000 shares authorized, 20,000 shares issued).......$1,500,000 Paid in capital in excess of Par- Preferred stock..............................................................240,000 Common stock, $15 par (500,000 shares authorized, 260,000 shares issued)............3,900,000 Paid-In Capital in excess of Par- Common Stock............................................................400,000 Retained Earnings.......................................................................................................12,750,000 During the year, the corporation completed a number of transactions affecting the stockholers' equity. They are summarized as follows: a. Issued 50,000 shares of common stock at $20, receiving cash. b. Issued 10,000 shares of preferred 2% stock at $92. c. Purchased 30,000 shares of tresury common for $480,000. d. Sold 15,000 shares of tresury common for $322,500. e. Sold 10,000 shares of tresury common for $155,000. f. declared cash dividends of $1.50 per share on preferred stock and $0.04 per share on common stock. g. Paid the cash dividends. Instructions: Journalize the entries to record the transactions. Identify each entry by letter.

Explanation / Answer

a. Issued 50,000 shares of common stock at $20, receiving cash. Dr. Cash 1000000 Cr. Common Stock 750000 Cr. PIC in Excess of Par - Common Stock 250000 b. Issued 10,000 shares of preferred 2% stock at $92. Dr. Cash 920000 Cr. Preferred Stock 750000 Cr. PIC in Excess of Par - Preferred Stock 170000 c. Purchased 30,000 shares of treasury common for $480,000. Dr. Treasury Stock 480000 Cr. Cash 480000 d. Sold 15,000 shares of treasury common for $322,500. The treasury shares were repurchased for 480,000 / 30,000 = $16 per share 15,000 x $16 = 240,000 322,500 - 240,000 = 82,500 Dr. Cash 322500 Cr. Treasury Stock 240,000 Cr. PIC from Sale of Treasury Stock 82,500 e. Sold 10,000 shares of treasury common for $155,000. 10,000 x $16 = 160,000 Since the cash received is $5,000 less than the repurchase price, the PIC accounts is decreased (debited). Dr. Cash 155000 Dr. PIC from Sale of Treasury Stock 5,000 Cr. Treasury Stock 160,000 f. Declared cash dividends of $1.50 per share on preferred stock and $0.04 per share on common stock. Preferred Dividends 20,000 + 10,000 = 30,000 shares outstanding 30,000 x 1.50 = $45,000 dividends Common Dividends 260,000 + 50,000 - 30,000 + 15,000 + 10,000 = 305,000 shares outstanding 305,000 x 0.04 = $12,200 dividends Dr. Cash Dividends 57,200 Cr. Cash Dividends Payable 57,200 g. Paid the cash dividends. Dr. Cash Dividends Payable 57,200 Cr. Cash 57,200

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