How do you journalize this? Wings over san diego (WOSD) is a publicly traded com

Question

How do you journalize this?

Wings over san diego (WOSD) is a publicly traded company with preferred and commom stock issured. As of Jan 1st it had 50000 shares of $100 par, 2% preferred stock outstanding and 250000 shares of $10 par common stock outstanding.

a) On Jan 31st the WOSD board of directors issues a requirement to purchase 5000 shares of WOSD common stock (its own stock) at the market price. The shares are purchased at market price of $22 per share.

b) On March 15 WOSD declares a dividend on preferred stock of $2 per share. The date of record is March 25th and the date of payment is March 31st.

c) On Dec 1 WOSD declares a cash dividend on common stock of $0.15 per share. The date of record is Dec 15th and the date of payment is Dec 21st

d) On Dec 27th the board orders that 2500 shares of treasury stock be sold. the sale price is $25 per share

How do I journalize a-d?

Explanation / Answer

Hi,

Please find the journal entries as follows:

Part A:

Dr Treasury Stock (5,000*22) 110000
Cr Cash 110,000

(Being Shares Repurchased for Cash and debited to Treasury Stock Account at the Market Price)

Part B:

March 15 (On the date of declaration)

Dr Cash Dividend (50000*2) 100000
Cr Dividends Payable 100000

(Being Dividend Declared on Preferred Stock)

March 25th (On the date of record)

No entry is required

March 31 (On the date of payment)

Dr Dividends Payable 100000
Cr Cash 100000

(Being Dividends Paid on Preferred Stock)

Part C:

Initally there were 250000 shares outstanding out of which 5000 have been repurchased. So now there are only 245000 (250000 - 5000) shares outstanding.

March 15 (On the date of declaration)

Dr Cash Dividend (245000*.15) 36750
Cr Dividends Payable 36750

(Being Dividend Declared on Common Stock)

December 15 (On the date of Record)

No entry is required

December 21 (On the date of Payment)

Dr Dividends Payable (245000*0.15) 36750
Cr Cash 36750

(Being Dividends Paid on Common Stock)

Part D:

Dr Cash (2500*25) 62500
Cr Treasury Stock (2500*22) 55000
Cr Paid-In-Capital from Sale of Treasury Stock 7500

(Being 2500 Treasury Shares Purchased at $ 22 sold at a price of $ 25)

Thanks.

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