National League Gear has two classes of stock authorized: 6%, $20 par preferred,
ID: 2466560 • Letter: N
Question
National League Gear has two classes of stock authorized: 6%, $20 par preferred, and $5 par value common. The following transactions affect stockholders’ equity during 2015, National League’s first year of operations:
February 2 Issue 1.0 million shares of common stock for $25 per share.
February 4 Issue 500,000 shares of preferred stock for $22 per share.
June 15 Repurchase 100,000 shares of its own common stock for $20 per share.
August
15 Reissue 75,000 shares of treasury stock for $35 per share.
November 1
Declare a cash dividend on its common stock of $1.00 per share and a $600,000 (6% of par value) cash dividend on its preferred stock payable to all stockholders on record on November 15. (Hint: Dividends are not paid on treasury stock.)
November 30 Pay the dividends declared on November 1.
17.value:
0.69 pointsRequired information
Required:
1.
Record each of these transactions.
2.
Prepare the stockholders’ equity section of the balance sheet as of December 31, 2015. Net income for the year was $4,800,000.
2.
Prepare the stockholders’ equity section of the balance sheet as of December 31, 2015. Net income for the year was $4,800,000.
Explanation / Answer
1.
Journal entries:
Working note:
2.
Stockholders' equity section of balance sheet:
Working note:
Date Accounts and explanations Debit ($) Credit ($) Feb. 2, 2015 Cash 25,000,000 Common stock (1,000,000 * $5 per share) 5,000,000 Paid-in capital in excess of Par value - Common Stock (1,000,000*$20 per share) ($25 - $5 = $20) 20,000,000 (To record the issue of common shares with premium by cash) Feb. 4, 2015 Cash 11,000,000 6% Preferred stock (500,000 * $20 per share) 10,000,000 Paid-in capital in excess of Par value - Preferred Stock (500,000*$2 per share) ($22 - $20 = $2) 1,000,000 (To record the issue of common shares with premium by cash) June. 15, 2015 Treasury stock (100,000*$20 per share) 2,000,000 Cash 2,000,000 (To record the repurchase of own stock) Aug. 15, 2015 Cash 2,625,000 Treasury stock (75,000 shares*$20 per share) 1,500,000 Paid in capital in excess of par value - Common stock (75,000 shares * $15 per share) ($35 - $20 = $15) 1,125,000 Nov. 1, 2015 Dividends (900,000 shares * $1 per share) 900,000 Dividends payable - Common stock 900,000 (To record the declaration of dividends on common stock) Nov. 1, 2015 Dividends ($10,000,000 * 6/100) 600,000 Dividends payable - Preferred stock 600,000 (To record the declaration of dividends on common stock) Nov. 30, 2015 Dividends payable - Common stock 900,000 Dividends payable - Preferred stock 600,000 Cash 1,500,000 (To record the payment of dividends due on common and preferred stocks)Related Questions
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