P13-41A Journalizing stock issuance and cash dividends and preparing the Learnin

Question

P13-41A Journalizing stock issuance and cash dividends and preparing the Learning Objectives 2, stockholders' equity section of the balance sheet D-Mobile Wireless needed additional capital to expand, so the business incorporated. The charter from the state of Georgia authorizes D-Mobile to issue 50,000 shares of 800, $50 par value cumulative preferred stock and 160,000 shares of $4 par value common stock. During the first month, D-Mobile completed the following transactions: 2. Total Stockholders' Equit $454,000 Issued 19,000 shares of common stock for a building with a market value of $240,000. Issued 600 shares of preferred stock for $140 per share. Issued 11,000 shares of common stock for cash of $55,000. Declared a $19,000 cash dividend for stockholders of record on Oct. 20. Use a separate Dividends Payable account for preferred and common stock. Paid the cash dividend. Oct. 2 6 9 10 25 Requirements 1. Record the transactions in the general journal. Prepare the stockholders' equity section of D-Mobile's balance sheet at October 31, 2018. Assume D-Mobile's net income for the month was $94,000.

Explanation / Answer

(1).

Date

Accounts Title & Explanation

Debit

Credit

Oct. 2

Building

$240000

      Common stock (19000 * $4)

$76000

      Additional paid in capital-common stock

$164000

(For recording issue of common stock for building)

Oct. 6

Cash (600 * $140)

$84000

      Preferred stock (600 * $50)

$30000

      Additional paid in capital-preferred stock

$54000

(For issue of preferred stock for cash)

Oct. 9

Cash (11000 * $5)

$55000

      Common stock (11000 * $4)

$44000

      Additional paid in capital-common stock (11000 * $1)

$11000

(For issue of common stock for cash)

Oct. 10

Cash dividend ($30000 * .08)

$2400

      Dividend payable-preferred stock

$2400

(For recording dividend payable on preferred stock)

Oct. 10

Cash dividend ($19000 – $2400)

$16600

      Dividend payable-common stock

$16600

(For recording dividend payable on common stock)

Oct. 25

Dividend payable-preferred stock

$2400

Dividend payable-common stock

$16600

      Cash

$19000

(For recording payment of dividend payable)

(2).

D-Mobile

Balance Sheet (Shareholders’ equity)

As on October 31, 2018

Common stock;

Common stock, par value

$120000

Additional paid in capital-common stock

$175000

Preferred stock;

Preferred stock, par value

$30000

Additional paid in capital-preferred stock

$54000

Total paid in capital

$379000

Retained earnings

$75000

Total shareholders’ equity

$454000

Balance of retained earnings will be calculated as follow;

(Net income $94000 – Dividend paid $19000) = $75000

Date

Accounts Title & Explanation

Debit

Credit

Oct. 2

Building

$240000

      Common stock (19000 * $4)

$76000

      Additional paid in capital-common stock

$164000

(For recording issue of common stock for building)

Oct. 6

Cash (600 * $140)

$84000

      Preferred stock (600 * $50)

$30000

      Additional paid in capital-preferred stock

$54000

(For issue of preferred stock for cash)

Oct. 9

Cash (11000 * $5)

$55000

      Common stock (11000 * $4)

$44000

      Additional paid in capital-common stock (11000 * $1)

$11000

(For issue of common stock for cash)

Oct. 10

Cash dividend ($30000 * .08)

$2400

      Dividend payable-preferred stock

$2400

(For recording dividend payable on preferred stock)

Oct. 10

Cash dividend ($19000 – $2400)

$16600

      Dividend payable-common stock

$16600

(For recording dividend payable on common stock)

Oct. 25

Dividend payable-preferred stock

$2400

Dividend payable-common stock

$16600

      Cash

$19000

(For recording payment of dividend payable)

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