On January 5, 2012, Phelps Corporation received a charter granting the right to
ID: 2352867 • Letter: O
Question
On January 5, 2012, Phelps Corporation received a charter granting the right to issue 5,000 shares of $100 par value, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of $10 par value common stock.It then completed these transactions:
Jan. 11 Issued 20,000 shares of common stock at $16 per share.
Feb. 1 Issued to Sanchez Corp. 4,000 shares of preferred stock for the following assets: equipment with a fair
value of $50,000; a factory building with a fair value of $160,000; and land with an appraised value of
$270,000.
July 29 Purchased 1,800 shares of common stock at $17 per share. (Use cost method.)
Aug. 10 Sold the 1,800 treasury shares at $14 per share.
Dec. 31 Declared a $0.25 per share cash dividend on the common stock and declared the preferred dividend.
Dec. 31 Closed the Income Summary account. There was a $175,700 net income.
Instructions
(a) Record the journal entries for the transactions listed above.
(b) Prepare the stockholders
Explanation / Answer
(a) January 11 Cash (20,000 X $16) 320,000 Common Stock (20,000 X $10) 200,000 Paid-in Capital in Excess of Par—Common 120,000 February 1 Machinery 50,000 Factory Building 160,000 Land 270,000 Preferred Stock (4,000 X $100) 400,000 Paid-in Capital in Excess of Par—Preferred 80,000 July 29 Treasury Stock (1,800 X $17) 30,600 Cash 30,600 August 10 Cash (1,800 X $14) 25,200 Retained Earnings (1,800 X $3) 5,400* Treasury Stock 30,600 *(The debit is made to Retained Earnings because no Paid-in Capital *from Treasury Stock exists.) December 31 Retained Earnings 37,000 Cash Dividend Payable—Common 5,000* Cash Dividend Payable—Preferred 32,000** *Common Stock Cash Dividend: Common shares outstanding 20,000 Common cash dividend X $.25 $5,000 **(4,000 X 100 X 8%) December 31 Income Summary 175,700 Retained Earnings 175,700 (b) PHELPS CORPORATION Stockholders’ Equity December 31, 2010 Capital stock Preferred stock—par value $100 per share, 8% cumulative and nonparticipating, 5,000 shares authorized, 4,000 shares issued and outstanding $400,000 Common stock—par value $10 per share, 50,000 shares authorized, 20,000 shares issued and outstanding 200,000 Total capital stock 600,000 Additional paid-in capital Paid-in capital in excess of par—preferred $ 80,000 Paid-in capital in excess of par—common 120,000 200,000 Total paid-in capital 800,000 Retained earnings 133,300* Total stockholders’ equity $933,300 *($175,700 – $5,400 – $37,000)
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.