Recording and reporting stock transactions and cash dividends across two account
ID: 2375788 • Letter: R
Question
Recording and reporting stock transactions and cash dividends across two accounting cycles in excel spreadsheet.
Davis Corporation was authorized to issue 100,000 shares of $10 par common stock and 50,000 shares of $50 par, 6 percent, cumulative preferred stock. Davis Corporation completed the following transactions during its first two years of operation.
2012
Jan.
2 Issued 5,000 shares of $10 par common stock for $28 per share.
15 Issued 1,000 shares of $50 par preferred stock for $70 per share.
Feb. 14 Issued 15,000 shares of $10 par common stock for $30 per share.
Dec.
31 During the year, earned $170,000 of cash service revenue and paid $110,000 of cash operating expenses.
31 Declared the cash dividend on outstanding shares of preferred stock for 2012. The dividend will be paid on January 31 to stockholders of record on January 15, 2013.
2013
Jan. 31 Paid the cash dividend declared on December 31, 2012.
Mar. 1 Issued 2,000 shares of $50 par preferred stock for $58 per share.
June 1 Purchased 500 shares of common stock as treasury stock at $43 per share.
Dec. 31 During the year, earned $210,000 of cash service revenue and paid $175,000 of cash operating expenses.
31 Declared the dividend on the preferred stock and a $0.60 per share dividend on the common stock.
.
a. Organize the transaction data in accounts under an accounting equation.
b. Prepare the stockholders%u2019 equity section of the balance sheet at December 31, 2012.
c. Prepare the balance sheet at December 31, 2013.
Explanation / Answer
2012
Jan. 2 - Issued 5,000 shares of $10 par common stock for $28 per share.
Dr Cash 140,000
Cr Paid-In Capital in Excess of Par, Common 90,000
Cr Common Stock 50,000
15 - Issued 1,000 shares of $50 par preferred stock for $70 per share.
Dr Cash 70,000
Cr Preferred Stock 50,000
Cr Paid-In Capital in Excess of Par, Preferred 20,000
Feb. 14 - Issued 15,000 shares of $10 par common stock for $30 per share.
Dr Cash 450,000
Cr Paid-In Capital in Excess of Par, Common 300,000
Cr Common Stock 150,000
Dec. 31 - During the year, earned $170,000 of cash service revenue and paid $110,000 of cash operating expenses.
Dr Income Summary 60,000
Cr Retained Earnings 60,000
31 - Declared the cash dividend on outstanding shares preferred stock for 2012. The dividend will be paid on January 31 to stockholders of record on January 15, 2013.
$50,000 x 6% = 3,000 cash dividend
Dr Retained Earnings 3,000
Cr Preferred Dividends Payable 3,000
2013
Jan. 31 - Paid the cash dividend declared on December 31, 2012.
Dr Preferred Dividends Payable 3,000
Cr Cash 3,000
Mar. 1 - Issued 2,000 shares of $50 par preferred stock for $58 per share.
Dr Cash 116,000
Cr Preferred Stock 100,000
Cr Paid-In Capital in Excess of Par, Preferred 16,000
June 1 - Purchased 500 shares of common stock as treasury stock at $43 per share
Dr Treasury Stock 21,500
Cr Cash 21,500
Dec. 31 - During the year, earned $210,000 of cash service revenue and paid $175,000 of cash operating expenses.
Dr Income Summary 35,000
Cr Retained Earnings 35,000
31 - Declared the dividend on the preferred stock and a $0.60 per share dividend on the common stock.
($50,000 + $100,000) x 6% = $9,000 preferred dividends
(5,000 + 15,000 - 500) x 0.60 = 11,700 common dividends
Dr Retained Earnings 20,700
Cr Common Dividends Payable 11,700
Cr Preferred Dividends Payable 9,000
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