The corporate charter of Martin Corporation allows the issuance of a maximum of
ID: 2489199 • Letter: T
Question
The corporate charter of Martin Corporation allows the issuance of a maximum of 4,000.000 shares of $1 par value common stock. During its first three years of operation, Martin issued 3,000,000 shares at $10 per share. It later acquired 20,000 of these shares as treasury stock for $25 per share. Based on the above information, answer the following questions: (a) How many shares were authorized? (b) How many shares were issued? (c) How many shares are outstanding? (d) What is the balance of the Common Stock account? (e) What is the balance of the Treasury Stock account? 4. On October 10. the board of directors of Pattern Corporation declared a 15% stock dividend. On October 10, the company had 20,000 shares of $2 par common stock issued and outstanding with a market price of $14 per share. The stock dividend will be distributed on October 31. Journalize the entries needed for the declaration and distribution of the stock dividend.Explanation / Answer
3.
a)
No. of share authorized = 4,000,000 shares
B)
No. of shares issued = 3,000,000 shares
c)
No. of shares outstanding = No. of shares issued – No. of shares repurchased =3,000,000 shares – 20,000 shares = 2,980,000 shares
d)
Balance of common stock account = Shares issued * Par value per share = 3,000,000 shares * $1 = $3,000,000
e)
Balance of Treasury stock account = Shares repurchased * Repurchase price per share = 20,000 shares *$25 = $500,000
4.
Date
Account titles and explanation
Debit
Credit
October 10
Retained earnings
$42,000
Stock dividend distributable
$42,000
(20,000 shares * 15%= 3,000 shares) *$14
October 31
Stock dividend distributable
$42,000
Common stock (3,000 shares *$2)
$6,000
Additional paid in capital (3,000 shares * $12)
$36,000
Date
Account titles and explanation
Debit
Credit
October 10
Retained earnings
$42,000
Stock dividend distributable
$42,000
(20,000 shares * 15%= 3,000 shares) *$14
October 31
Stock dividend distributable
$42,000
Common stock (3,000 shares *$2)
$6,000
Additional paid in capital (3,000 shares * $12)
$36,000
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