he stockholders’ equity accounts of Solomon Corporation on January 1, 2016, cont

Question

he stockholders’ equity accounts of Solomon Corporation on January 1, 2016, contained the following balances: Preferred Stock (10%, $50 par value, 4,000 shares authorized) Issued and Outstanding, 2,050 Shares $ 102,500 Paid-in Capital in Excess of Par Value—Preferred 2,050 $ 104,550 Common Stock ($20 par value, 13,000 shares authorized) Issued and Outstanding, 6,500 Shares 130,000 Retained Earnings 190,200 Total Stockholders’ Equity $ 424,750 DATE TRANSACTIONS June 15 Declared a semiannual dividend of 5 percent on preferred stock, payable on July 15 to stockholders of record on June 30. July 15 Paid the dividend on preferred stock. Dec. 15 Declared a semiannual dividend of 5 percent on preferred stock, payable on January 15, 2017, to stockholders of record on December 31, 2016, and a cash dividend of $3.7 per share on common stock, payable on January 15, 2017, to stockholders of record on December 31, 2016. Make separate entries. 15 Declared a 15 percent common stock dividend to common stockholders of record on December 31, 2016. The new shares are to be issued on January 15, 2017. A fair value price of $25 per share is expected for the new shares of common stock. Dec. 31 Created an “appropriation of retained earnings for contingencies” of $43,000 because of the poor economic outlook. 31 The Income Summary account contained a debit balance of $11,500. The board had anticipated a net loss for the year and no quarterly deposits of estimated income taxes were made, so income taxes may be ignored. 2.1 Record the above transactions in the general journal for 2016.

Explanation / Answer

SOLOMON CORPORATION General journal Date Account Title Debit Credit June.15 Dividend 5125 Dividend Payable 5125 (Semi annual dividend on preferred stock delared) July.15 Dividend Payable 5125 Cash 5125 (Payment of dividend to preferred stock) Dec.15 Dividend 5125 Dividend Payable 5125 (Semi annual dividend on preferred stock delared) Dec.15 Dividend 24375 Stock dividend distributable 24125 (15% stockdividend on 6,500 shares of common stock) Dec.31 Retained Earnings 43000 Appropriation for contingencies 43000 (Creation of an appropriation for contingencies) Dec.31 Retained Earnings 11500 Income Summary 11500 (Net loss for the year closed to retained earnings)

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