On December 31, 2014, Flimsy Incorporated, had the following balances (all balan

Question

On December 31, 2014, Flimsy Incorporated, had the following balances (all balances are normal):

Accounts

Amount

Preferred Stock, ($100 par value, 5% noncumulative, 50,000 shares authorized, 10,000 shares issued and outstanding)

$1,000,000

Common Stock ($10 par value, 200,000 shares authorized, 100,000 shares issued and outstanding)

$1,000,000

Paid-in Capital in Excess of par, Common

150,000

Retained Earnings

700,000

The following events occurred during 2014 and were not recorded:

            a. On January 1, Flimsy declared a 5% stock dividend on its common stock when the market value of the common stock was $15 per share. Stock dividends were distributed on January 31 to shareholders as of January 25.

            b. On February 15, Flimsy reacquired 1,000 shares of common stock for $20 each.

            c. On March 31, Flimsy reissued 250 shares of treasury stock for $25 each.

            d. On July 1, Flimsy reissued 500 shares of treasury stock for $16 each.

            e. On October 1, Flimsy declared full year dividends for preferred stock and $1.50 cash dividends for outstanding shares and paid shareholders on October 15.

            f. One December 15, Flimsy split common stock 2 shares for 1.

            g. Net Income for 2014 was $275,000.

Requirements:

a. Prepare journal entries for the transactions listed above.

b. Prepare a Stockholders' section of a classified balance sheet as of December 31, 2014.

Accounts

Amount

Preferred Stock, ($100 par value, 5% noncumulative, 50,000 shares authorized, 10,000 shares issued and outstanding)

$1,000,000

Common Stock ($10 par value, 200,000 shares authorized, 100,000 shares issued and outstanding)

$1,000,000

Paid-in Capital in Excess of par, Common

150,000

Retained Earnings

700,000

Explanation / Answer

USD$ USD$

January 1 Retained earnings a/c Dr 75000

Common stock $10 par value 50000

Paid in capital in excess of par a/c 25000

(stock dividend declared to the shareholder)

February 15, Treasury Stock a/c Dr 20000

Cash a/c 20000

(Being shares reacquired at a market value of $20 for 1000 shares)

c) March 31 Cash a/c Dr 6250

Paid in capital in excess of par ((25-20)$*250) 1250

Treasury Stock ($20*250) 5000

d) July 1 Cash a/c Dr 8000

Paid in capital in excess of par a/c Dr 2000

Treasury Stock a/c 10000

(Shares reissued at $16 which is less than the acquisition cost $20 so $4 will be debited to retained earnings)

e) October 1 Retained Earnings a/c Dr (5% of $1000000) 50000

Dividend in Preferred stock payable a/c 50000

(Preferred Dividend declared)

  

Retained Earnings a/c Dr (5% of $1000000) 158625

Dividend in common stock payable a/c 158625

(No of shares= 100000+5000+250+500= 105750 @ $1.5)

October 15   Dividend in Preferred stock payable a/c Dr 50000

Dividend in common stock payable a/c Dr 158625

Cash a/c 658625

Accounts Amount Preferred Stock, ($100 par value, 5% noncumulative, 50,000 shares authorized, 10,000 shares issued and outstanding) $1,000,000 Common Stock ($5 par value, 200,000 shares authorized, (100,000+5000-1000+250+500) 105750*2= 211500 shares issued and outstanding) after stock spilt $1,000,000 Treasury stock 250 Shares $5,000 Paid-in Capital in Excess of par, Common 174,250 Note: 150000+25000+1250-2000=174250 Retained Earning 691,375 700000-75000-50000-158625+275000=691375 Total $2,870,625

Related Questions

Navigate

• Browse (All)
• Browse O
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.