On January 5, 2014, Phelps Corporation received a charter granting the right to
ID: 2477326 • Letter: O
Question
On January 5, 2014, Phelps Corporation received a charter granting the right to issue 5,500 shares of $103 par value, 7% cumulative and nonparticipating preferred stock, and 54,300 shares of $11 par value common stock. It then completed these transactions.
(a) Record the journal entries for the transactions listed above.
(b) Prepare the stockholders’ equity section of Phelps Corporation’s balance sheet as of December 31, 2014.
Jan. 11 Issued 20,420 shares of common stock at $18 per share. Feb. 1 Issued to Sanchez Corp. 4,200 shares of preferred stock for the following assets: equipment with a fair value of $58,690; a factory building with a fair value of $165,300; and land with an appraised value of $334,900. July 29 Purchased 1,850 shares of common stock at $17 per share. (Use cost method.) Aug. 10 Sold the 1,850 treasury shares at $13 per share. Dec. 31 Declared a $0.30 per share cash dividend on the common stock and declared the preferred dividend. Dec. 31 Closed the Income Summary account. There was a $177,110 net income.Explanation / Answer
Journal Entries
Date
Account titles
Debit
Credit
Jan 1
Cash
$367,560
To common stock
(20,420*11)
$224,620
To Paid in capital in excess of par – common stock
142,940
Feb 1
Equipment
$58,690
Factory building
165,300
Land
334,900
To preferred stock
(4200*103)
$432,600
To Paid in excess of par-Preferred Stock
126,290
July 29
Treasury stock
$31,450
To Cash
$31,450
Aug 10
Cash
24,050
Retained earnings
7,400
To Treasury stock
$31,350
Dec 31
Retained earnings
36,408
To Dividend payable
(preferred 103*7%*4200=30,282
Common 20420*.30=6,126
36,408
Dec 31
Retained earnings
$177,110
To Net income
$177,110
Balance sheet
Capital stock
Preferred stock—par value $103 per share,
7% cumulative and nonparticipating,
5,500 shares authorized
4,200 shares issued and outstanding $432,600
Common stock—par value $11 per share,
54,300 shares authorized,
20,420 shares issued and outstanding 224,620
Total capital stock 657,220
Additional paid-in capital
Paid-in capital in excess of par—preferred $ 126,290
Paid-in capital in excess of par—common 142,940 269,230
Total paid-in capital 926,450
Add: Retained earnings 133,302
Total Stockholder’s Equity $1,059,752
Date
Account titles
Debit
Credit
Jan 1
Cash
$367,560
To common stock
(20,420*11)
$224,620
To Paid in capital in excess of par – common stock
142,940
Feb 1
Equipment
$58,690
Factory building
165,300
Land
334,900
To preferred stock
(4200*103)
$432,600
To Paid in excess of par-Preferred Stock
126,290
July 29
Treasury stock
$31,450
To Cash
$31,450
Aug 10
Cash
24,050
Retained earnings
7,400
To Treasury stock
$31,350
Dec 31
Retained earnings
36,408
To Dividend payable
(preferred 103*7%*4200=30,282
Common 20420*.30=6,126
36,408
Dec 31
Retained earnings
$177,110
To Net income
$177,110
Related Questions
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.