For each event record the Journal entry relating to the event and display the eq
ID: 2401645 • Letter: F
Question
For each event record the Journal entry relating to the event and display
the equity section after the event
Event:
1 authorized 2.1 millions of common stock $25 par value
2 sell 820,000 share for net proceeds of $40 per share
3 issue for legal services rendered to set up company 4000 shares, market @ issue = $45/share
4 issue 100,000 of preferred stock $5 par for $50, $4/share cumulative dividend
5 record first year net income $2400,000
6 No dividends that first year
7 no dividends the next year [ 2 years without dividends ]
8 record net income for third year of $1500,000 [-0- net income yr. 2]
9 Declare & pay preferred & common dividends of $1800,000 [can shop as one or two JE's]
note: show how much per share dividends for common & preferred paid
10 Buy back 125,000 common shares @ $35/share
11 buy back 50,000 common shares @ $65/share
12 buy land with market value of $8000,000 for 110,000 shares from treasury [use average price per share] with a share market value of $70
please type
Explanation / Answer
Formula sheet
A B C D E F G H I 2 3 1) 4 5 Aurthorized Common Stocks 2.1 millions 6 Par Value $25 7 8 As there is no transaction, no journal entry is required. 9 10 2) 11 12 Number of shares Issued 820000 13 Net Proceed Per Share $40 14 15 Journal entry for issue of share will be: 16 17 Account Debit Credit 18 Cash (820,000*$40) $32,800,000 19 Common Stock (820,000*$25) $20,500,000 20 Additional Paid in Capital-Common Stock $12,300,000 21 22 3) 23 24 Number of shares Issued 4000 25 Market price per Share $45 26 27 Journal entry for issue of share will be: 28 29 Account Debit Credit 30 Legal Expense (4,000*$45) $180,000 31 Common Stock (4,000*$25) $100,000 32 Additional Paid in Capital-Common Stock $80,000 33 34 4) 35 36 Number of preferred shares Issued 100,000 37 Par Value per preferred share $5 38 Market price per Share $50 39 Journal entry for issue of share will be: 40 41 Account Debit Credit 42 Cash (100,000*$50) $5,000,000 43 Preferred Stock (100,000*$5) $500,000 44 Additional Paid in Capital-Preferred Stock $4,500,000 45 46 5) 47 Net income will increase the retained earnings. 48 49 Account Debit Credit 50 Income Summary $2,400,000 51 Retained Earnings $2,400,000 52 53 6) 54 55 Since no dividends paid there will not be any journal entry. 56 57 7) 58 59 Since no dividends paid there will not be any journal entry. 60 61 8) 62 63 Income In Year 2 0 64 65 Journal entry to record income in Year 3 66 Account Debit Credit 67 Income Summary $1,500,000 68 Retained Earnings $1,500,000 69 70 9) 71 72 Since preferred shares are cumulative, therefore all the dividends not paid during last two years will be paid first. 73 Dividend per preferred Share $4 74 Number of preferred share issued 100000 75 Dividend for preferred share in year1 $400,000.00 76 Dividend for preferred share in year2 $400,000.00 77 Total Preferred Dividends Due $800,000.00 78 Preferred Deividends for Year 3 $400,000 79 Total Preferred Dividends $1,200,000.00 80 81 Preferred Dividends per share $12.00 =D79/D74 82 83 84 Common Dividends $1,800,000 85 Number of Common shares outstanding 824000 86 87 Common Dividends per share $2.18 =D84/D85 88 89 Journal entry for declaration of common and preferred dividends: 90 Account Debit Credit 91 Retained Earnings $3,000,000 92 Dividends Payable $3,000,000 93 94 Journal entry for payment of dividends: 95 Account Debit Credit 96 Dividends Payable $3,000,000 97 Cash $3,000,000 98 99 10) 100 101 Number of shares bought 125000 102 Market Price $35 103 104 Journal entry will be as follows: 105 Accounts Debit Cash 106 Treasury Stock $4,375,000 107 Cash $4,375,000 108 109 11) 110 111 Number of shares bought 50000 112 Market Price $65 113 114 Journal entry will be as follows: 115 Accounts Debit Cash 116 Treasury Stock $3,250,000 117 Cash $3,250,000 118 119 12) 120 Total Treasury Stock $7,625,000 121 Total number of Tresury Stock 175000 122 Average Cost per Treasury Stock $43.57 123 124 Number of treasury stock issued for land 110,000 125 Market Price Per share $70 126 127 Journal entry will be as follows: 128 Accounts Debit Cash 129 Land $8,000,000 130 Treasury Stock $4,792,857 131 Additional Paid in Capital -Treasury Stock $2,907,143 132 Cash $300,000 133Related Questions
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