Journalize the entries to record the transactions. Refer to the Chart of Account
ID: 2532423 • Letter: J
Question
Journalize the entries to record the transactions. Refer to the Chart of Accounts for exact wording of account titles.
Instructions The following selected accounts appear in the ledger of Parks Construction Inc. at the beginning of the current year. Preferred 296 Stock, $75 par (100,000 shares authorized, 80,000 shares issued) Paid-In Capital in Excess of Par-Preferred Stock Common Stock, $8 par (5,000,000 shares authorized, 3,000,000 shares issued) Paid-In Capital in Excess of Par-Common Stock Retained Earnings $6,000,000 420,000 24,000,000 1,850,000 115,400,000 During the year, the corporation completed a number of transactions affecting the stockholders' equity. They are summarized as follows: Jan. 5 Issued 400,000 shares of common stock at $11, receiving cash. Feb. 10 issued 5,000 shares of preferred 2% stock at S90. Mar 19 Purchased 150,000 shares of treasury common for S10 per share. May 16 Sold 80,000 shares of treasury common for $13 per share. Aug. 25 Sold 20,000 shares of treasury common for S9 per share. Dec. 6 Declared cash dividends of $1.50 per share on preferred stock and $0.06 per share on common stock 31 Paid the cash dividends.Explanation / Answer
Journals are as below:
Date
Description
P.ref
Debit
Credit
05/01
Cash (400,000 × $11 =)
$4,400,000
Common stock (400,000 × $8 =)
$3,200,000
Paid-in capital in excess of par-common stock (400,000 × $3 =)
$1,200,000
To record issue of 400,000 common shares at $11 each
10/02
Cash (5,000 × $90 =)
$450,000
Preferred stock (5,000 × $75 =)
$375,000
Paid-in capital in excess of par-preferred stock (5,000 × $15 =)
$75,000
To record issue of 5,000 preference shares at $90 each
19/03
Treasury stock (150,000 × $10 =)
$1,500,000
Cash
$1,500,000
To record repurchase of 150,000 common shares
16/05
Cash (80,000 × $13 =)
$1,040,000
Treasury stock (80,000 × $10 =)
$800,000
Paid-in capital from sale of treasury stock (80,000 × $3 =)
$240,000
To record sale of 80,000 treasury shares at $13 each
25/08
Cash (20,000 × $9 =)
$180,000
Paid-in capital from sale of treasury stock (20,000 × $1 =)
$20,000
Treasury stock (20,000 × $10 =)
$200,000
To record sale of 20,000 treasury shares at $9 each
06/12
Cash dividends
$322,500
Cash dividends payable
$322,500
To record declaration of preferred and common stock cash dividends
31/12
Cash dividends payable
$322,500
Cash
$322,500
To record payment of cash dividends
Dividends calculation:
Outstanding preference shares at the year-end = Beginning + Issued = 80,000 + 5,000 = 85,000
Preferred dividends = Outstanding preference shares × Dividends per preference share = 85,000 × $1.50 = $127,500
Outstanding common shares at the year-end = Beginning + Issued – Treasury stock = 3,000,000 + 400,000 – 150,000 = 3,250,000
Common dividends = Outstanding common shares × Dividends per common share = 3,250,000 × $0.06 = $195,000
Total cash dividends = $127,500 + $195,000 = $322,500.
Date
Description
P.ref
Debit
Credit
05/01
Cash (400,000 × $11 =)
$4,400,000
Common stock (400,000 × $8 =)
$3,200,000
Paid-in capital in excess of par-common stock (400,000 × $3 =)
$1,200,000
To record issue of 400,000 common shares at $11 each
10/02
Cash (5,000 × $90 =)
$450,000
Preferred stock (5,000 × $75 =)
$375,000
Paid-in capital in excess of par-preferred stock (5,000 × $15 =)
$75,000
To record issue of 5,000 preference shares at $90 each
19/03
Treasury stock (150,000 × $10 =)
$1,500,000
Cash
$1,500,000
To record repurchase of 150,000 common shares
16/05
Cash (80,000 × $13 =)
$1,040,000
Treasury stock (80,000 × $10 =)
$800,000
Paid-in capital from sale of treasury stock (80,000 × $3 =)
$240,000
To record sale of 80,000 treasury shares at $13 each
25/08
Cash (20,000 × $9 =)
$180,000
Paid-in capital from sale of treasury stock (20,000 × $1 =)
$20,000
Treasury stock (20,000 × $10 =)
$200,000
To record sale of 20,000 treasury shares at $9 each
06/12
Cash dividends
$322,500
Cash dividends payable
$322,500
To record declaration of preferred and common stock cash dividends
31/12
Cash dividends payable
$322,500
Cash
$322,500
To record payment of cash dividends
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