Help Principles of Financial Accounting Problem # 63 Reporting the Stockholders\

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Principles of Financial Accounting

Problem # 63 Reporting the Stockholders' Equity Section of the Balance Sheet

Shelby Corporation was organized in January to operate an air-conditioning

sales and service business. The charter issued by the State of Texas

authorized the following capital stock.

Common Stock, $3 par value, 200,000 shares Preferred Stock, $10 par value, 6% cumulative, 50,000 shares

During the year, the following stock transactions were completed:

1. Collected $400,000 cash and issued 20,000 shares of common stock (Jan 15th) 2. Issued 15,000 shares of preferred stock at $30, per share, collected cash (Feb 2nd) 3. Net Income for the year was $50,000 4. On December 20, a Cash Dividend of $10,000 was declared, and

will be paid on January 5 of the next year.

Use the designated Journal Entry Worksheet to show the journal entries for the above transactions. (Hint: there is no entry for item # 3.)

Use the space below for your calculations, and the attached worksheets for the journal entries.

Explanation / Answer

Jan 15th

Cash.........................................................................Dr. $400000

Common stock...........................................................................Cr. $60000

Paid in capital in excess of par value - common stock...................Cr. $340000

(Issued common stock. Par value = 20000x$3= $60000; paid in capital in excess of par value = $400000 - $60000 = $340000)

February 2

Cash.........................................................................Dr. $450000

Common stock...........................................................................Cr. $150000

Paid in capital in excess of par value - preferred stock...................Cr. $300000

(issued preferred stock for $30 x 15000 = $450000. Par value = $10 x 15000 = $150000 and paid in capital in excess of par value = $20 x 15000 = $300000)

Dec 20

Retained earnings ..................................Dr. $10000

Cash Dividend payable............................................Cr. $10000

(dividend declared)

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