1.A company has the following capital structure at the beginning of the year: 4%
ID: 2462999 • Letter: 1
Question
1.A company has the following capital structure at the beginning of the year:
4% Preferred stock, $50 par value, 20,000 shares authorized,
6,000 shares issued and outstanding $ 300,000
Common stock, $10 par value, 60,000 shares authorized,
40,000 shares issued and outstanding 400,000
Paid-in capital in excess of par 110,000
Total paid-in capital 810,000
Retained earnings 440,000
Total stockholders' equity $1,250,000
Using T-account format, prepare the entries to recognize the following transactions which occurred consecutively.
a.A total cash dividend of $90,000 was declared and payable to stockholders of record. Record dividends payable on common and preferred stock in separate accounts.
b.A 15% common stock dividend was declared. The average fair value of the common stock is $22 a share.
c.Assume that net income for the year was $140,000 (record the closing entry) and the board of directors appropriated $70,000 of retained earnings for plant expansion.
Explanation / Answer
All Amounts in $ Dividend on 4% Preferred Stock A/c Dividend on Common Stock A/c To Dividend Payable A/c 12000 To Dividend Payable A/c 78000 Common Stock A/c Stock Dividend A/c Excess over Paid-in Capital A/c By Stock Dividend A/c 60000 To Common Stock A/c 60000 By Stock Dividend A/c 72000 To Excess Over Paid-in Capital A/c 72000 Retained Earnings A/c Capital Expansion A/c To Capital By Profit and Loss A/c 140000 By Retained Earnings A/c 70000 Expansion A/c 70000 Dividend Payable A/c By Dividend on 4% Preferred Stock A/c 12000 By Dividend on Common Stock A/c 78000
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