National League Gear has two classes of stock authorized: 4%, $20 par preferred,
ID: 2487014 • Letter: N
Question
National League Gear has two classes of stock authorized: 4%, $20 par preferred, and $5 par value common. The following transactions affect stockholders’ equity during 2015, National League’s first year of operations:
Declare a cash dividend on its common stock of $1.10 per share and a $408,000 (4% 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.)
Pay the dividends declared on November 1.
a)Record each of these transactions to the journal worksheet.
b) Prepare the stockholders’ equity section of the balance sheet as of December 31, 2015. Net income for the year was $4,810,000. (Amounts to be deducted should be indicated by a minus sign.) Record preferred stock, common stock,additional paid in capital, total paid in capital, retained earningbs, treasury stock etc.
National League Gear has two classes of stock authorized: 4%, $20 par preferred, and $5 par value common. The following transactions affect stockholders’ equity during 2015, National League’s first year of operations:
Explanation / Answer
a) journalising above
b) Shareholders equity section
Date Particulars Debit Credit 2-Feb Cash 28600000 Commmon stock 5500000 Additional paid in capital - common stock 23100000 issued common stock of par value 5 at 26 Number of shares issued = 1.1 Million x 1000000, = 1100000 4-Feb Cash 11730000 8% Preffered stock 10200000 Additional paid in capital - Preferred stock 1530000 issued preferred stock of 20 at 23 15-Jun Treasury stock 2310000 cash 2310000 Re purchased it own common stock at 21 15-Aug Cash 2970000 Treasury stock 1732500 Additional paid in capital - Treasury Stock 1237500 Issued treasury stock purchased at 21 for 36 additional paid in capital = 15 ( 36-21) 15-Nov Cash Dividend 1587750 Cash dividend payable 1587750 Cash dividend on common stock Number of shares = Issued - treaury stock held = 1100000 - 27500, = 1072500 = 1072500 x 1.10 1179750 Cash dividend on Preferred stock = 4% of ( 510000 x 20) = 408000 Since dividend is based on shares outstanding on november 15 dividend will get due on nov - 15 and not nov - 1 30-Nov Cash Dividend Payable 1587750 Cash 1587750 Cash dividend paidRelated Questions
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