The following information applies to the questions displayed below. Malard Corpo

Question

The following information applies to the questions displayed below. Malard Corporation was authorized to issue 200,000 shares of $8 par common stock and 50,000 shares of $80 par, 4 percent, cumulative preferred stock. Malard Corporation completed the following transactions during its first two years of operation: 2014 Jan. 2 Issued 75,000 shares of $8 par common stock for $10 per share. 15 Issued 22,000 shares of $80 par preferred stock for $90 per share. 14 Issued 60,000 shares of $8 par common stock for $12 per share. 31 During the year, earned $680,000 of cash revenues and paid $394,400 of cash operating Feb. Dec. expenses. 31 Declared the cash dividend on outstanding shares of preferred stock for 2014. The dividend will be paid on January 31 to stockholders of record on January 15, 2015 31 Closed revenue, expense, and dividend accounts to the retained earnings account. 2015 Jan. 31 Paid the cash dividend declared on December 31, 2014 Mar. 1Issued 12,000 shares of $80 par preferred stock for $92 per share June 1Purchased 5,000 shares of common stock as treasury stock at $14 per share. Dec. 31 During the year, earned $585,000 of cash revenues and paid $339,300 of cash operating expenses. 31 Declared the dividend on the preferred stock and a $1.00 per share dividend on the common stock. 31 Closed revenue, expense, and dividend accounts to the retained earnings account.

Explanation / Answer

Solution:

a) Organizing the Transaction Data in Accounts under an Accounting Equation:

*Preferred Stock: $80 x 4% x 22,000 shares = $70,400

**Preferred Stock: $80 x 4% x 34,000 shares = $108,800

Common Stock: Shares outstanding, 130,000 x $1.00 = $130,000

Total Dividend = $238,800

b) Preparing the Stockholder's Equity Section of the Balance Sheet at December 31, 2014:

Malard Coproration

Balance Sheet (Partial)

December 31, 2014

c) Preparing the Balance Sheet at December 31, 2015:

Malard Corporation

Balance Sheet

As of December 31, 2015

MALARD CORPORATION Accounting Equation Event Assets = Liabilities + Stockholders’ Equity Accounts Titles for Retained Earnings Cash = Dividends Payable + Preferred Stock + Common Stock + Paid-In Capital in Excess Preferred Stock + Paid-In Capital in Excess Common Stock – Treasury Stock + Retained Earnings 2014 1/2 750,000 = NA + NA + 600,000 + NA + 150,000 – NA + NA 1/15 1,980,000 = NA + 1,760,000 + NA + 220,000 + NA – NA + NA 2/14 720,000 = NA + NA + 480,000 + NA + 240,000 – NA + NA 12/31 680,000 = NA + NA + NA + NA + NA – NA + 680,000 Service Revenue 12/31 (394,400) = NA + NA + NA + NA + NA – NA + (394,400) Operating Expense 12/31* NA = 70,400 + NA + NA + NA + NA – NA + (70,400) Dividends Bal. $3,735,600 = $70,400 + $1,760,000 + $1,080,000 + $220,000 + $390,000 – 0 + $215,200 2015 Beg. bal. $3,735,600 = $70,400 + $1,760,000 + $1,080,000 + $220,000 + $390,000 – 0 + $215,200 1/31 (70,400) = (70,400) + NA + NA + NA + NA – NA + NA 3/1 1,104,000 = NA + 960,000 + NA + 144,000 + NA – NA + NA 6/1 (70,000) = NA + NA + NA + NA + NA – 70,000 + NA 12/31 585,000 = NA + NA + NA + NA + NA – NA + 585,000 Service Revenue 12/31 (339,300) = NA + NA + NA + NA + NA – NA + (339,300) Operating Expense 12/31** NA = 238,800 + NA + NA + NA + NA – NA + (238,800) Dividends End. bal. $4,944,900 = $238,800 + $2,720,000 + $1,080,000 + $364,000 + $390,000 – $70,000 + $222,100

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