Question 1 The stockholders\' equity accounts of Pronghorn Corp. on January 1, 2
ID: 2396549 • Letter: Q
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Question 1 The stockholders' equity accounts of Pronghorn Corp. on January 1, 2017, were as follows Preferred Stock (6%, $100 par noncumulative, 4,250 shares authorized) Common Stock ($3 stated value, 350,000 shares authorized) Paid-in Capital in Excess of Par Value-Preferred Stock Paid-in Capital in Excess of Stated Value Common Stock Retained Earnings Treasury Stock (4,250 common shares) $255,000 875,000 12,750 560,000 686,000 34,000 During 2017, the corporation had the following transactions and events pertaining to its stockholders' equity Feb. 1 Issued 5,440 shares of common stock for $32,640 Mar. 20 Purchased 1,500 additional shares of common treasury stock at $9 per share. Oct. 1 Declared a 6% cash dividend on preferred stock, payable November 1 Nov. 1 Paid the dividend declared on October 1 Dec. 1 Declared a $0.50 per share cash dividend to common stockholders of record on December 15, payable December 31, 2017 Dec. 31 Determined that net income for the year was $275,600. Paid the dividend declared on December 1Explanation / Answer
Correct Journal entry on December 1st for Dividend Payable on Common Stock
Cash Dividends $ 145,678.33
Dividends Payable $ 145,678.33
(dividend Payable)
Calculation of Dividends
Number of shares Outstanding on December 15 and Dividend
Opening balance (875000/3)
291666.6667
Less: Opening Treasury stock
-4250
Add: Issued on Feb 1
5440
Less: additional Treasury stock purchased on mar 20
-1500
Total Common stock on December 15
291356.6667
Dividend per share
0.5
Total Dividend
$ 145,678.33
Correct Journal entry on December 31st for Dividend paid in cash on Common stock.
Dividends Payable $ 145,678.33
Cash $ 145,678.33
(cash dividend paid on common stock)
Correct Journal entry on December 31st for deducting Retained earnings with the amount of dividends paid on common stock and preferred stock.
Retained Earnings $ 160978.33
Cash Dividends $ 160978.33
(dividends distributed out of Retained Earnings)
PRONGHORN CORP.
Partial Balance sheet
as at December 31st 2017
Shareholder’s equity
Retained Earnings
$ 800,621.67
Common stock
$ 891,320.00
Preferred Stock
$ 255,000.00
Treasury Stock
$ (47,500.00)
Additional Paid in Capital- Common Stock
$ 576,320.00
Additional Paid in Capital- Preferred Stock
$ 12,750.00
Total Shareholder's Equity
$ 2,488,511.67
Notes
Number of shares Outstanding on December 15 and Dividend
Opening balance (875000/3)
291666.6667
Less: Opening Treasury stock
-4250
Add: Issued on Feb 1
5440
Less: additional Treasury stock purchased on mar 20
-1500
Total Common stock on December 15
291356.6667
Dividend per share
0.5
Total Dividend
$ 145,678.33
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