IV. (30 points) Prepare journal entries for ABC Co.’s following events. 05/12/08

Question

IV. (30 points)

Prepare journal entries for ABC Co.’s following events.

05/12/08 Received charter authorizing ABC Co. to issue 20,000 shares of common stock at a par value of $2 per share.

06/03/08 Issued 8,000 shares of stock, receiving $40,000.

06/04/08 Paid the law firm of Lo, Ball and Hyde for their services to help organize the company by sending them two thousand shares of stock.

11/15/08 Declared a cash dividend of $2 per share, payable on 01/15/09, to holders of record as of 12/15/08.

12/15/08 Make the appropriate entry.

12/31/08 Make any necessary adjusting entry.

01/15/09 Make the appropriate entry.

06/12/09 Declared a ten percent (10%) stock dividend, payable on 7/15/09 (ignore the date of record for this event). The market value of the stock is $15 per share.

07/15/09 Make the appropriate entry.

08/15/09 Declared a two-for-one stock split. The market value of the stock is $15 per share.

09/15/09 Declared and paid a cash dividend of $2 per share (pretend this happens all in one day).

10/01/09 Purchased 1,000 shares of treasury stock for a total price of $30,000.

10/15/09 Declared and paid a cash dividend of $2 per share.

11/15/09 Reissued 400 shares of treasury stock at $32 each.

12/15/09 Reissued the remaining treasury stock at $10 per share.

Explanation / Answer

5-Dec No entry 6-Mar Cash Dr 40000         Common stock Cr 16000          Additional paid in capital - common stock Cr 24000 6-Apr Legal fees Dr 4000          Common stock Cr 4000 15-Nov Retained earnings Dr 20000             Dividend payable Cr 20000 ( 10000*2) 31-Dec No adjusting entry 15-Jan Dividend payable Dr 20000 Cash Cr 20000 12-Jun Retained earnings Dr 15000           Stock dividend distributable Cr 15000 ( 10000 * 10% * 15) 15-Jul Stock dividend distributable Dr 15000                 Common stock Cr 3000                 Additional paid in capital - common stock Cr 12000 15-Aug memo entry number of share - 10000 * 2 = 20000 par value = 2/2 = 1 15-Sep Retained earnings Dr 40000             Dividend payable Cr 40000 ( 20000 *2) Dividend payable Dr 40000                 Cash Cr 40000 1-Oct Treasury stock Dr 30000                  Cash Cr 30000 15-Oct Dividend Dr 38000               Cash Cr 38000 ( 20000 - 1000 = 19000 shares @ 2) 15-Nov Cash Dr 12800                 Treasury stock Cr 12000                  Additional paid in capital - treasury stock Cr 800 15-Dec Cash Dr 6000 Additional paid in capital Dr 800 Discount on issue of treasury stock Dr 11200                  Treasury stock Cr 18000

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