Exercise 15-18 No. Account Titles and Explanation Debit Credit Exercise 15-18 Sh

Question

Exercise 15-18

No.

Account Titles and Explanation

Debit

Credit

Exercise 15-18

Shamrock Company reported the following amounts in the stockholders’ equity section of its December 31, 2016, balance sheet.
Preferred stock, 9%, $100 par (10,000 shares authorized, 1,800 shares issued) $180,000 Common stock, $5 par (96,000 shares authorized, 19,200 shares issued) 96,000 Additional paid-in capital 113,000 Retained earnings 449,000    Total $838,000
During 2017, Shamrock took part in the following transactions concerning stockholders’ equity.
1. Paid the annual 2016 $9 per share dividend on preferred stock and a $2 per share dividend on common stock. These dividends had been declared on December 31, 2016. 2. Purchased 1,800 shares of its own outstanding common stock for $42 per share. Shamrock uses the cost method. 3. Reissued 800 treasury shares for land valued at $34,500. 4. Issued 460 shares of preferred stock at $104 per share. 5. Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $49 per share. 6. Issued the stock dividend. 7. Declared the annual 2017 $9 per share dividend on preferred stock and the $2 per share dividend on common stock. These dividends are payable in 2018.

Explanation / Answer

Solution:

Part 1 --- Journal Entries

Event

Account Titles and Explanation

Debit

Credit

1)

Dividend Payable -- Common Stock ($2*19,200 Shares)

$38,400

Dividend Payable -- Preferred Stock ($9*1800)

$16,200

   Cash

$54,600

2)

Treasury Stock (1800 Shares x $42)

$75,600

Cash

$75,600

3)

Cash (800 Shares)

$34,500

Treasury Stock (800 Shares x Cost $42)

$33,600

Additional Paid in Capital From Treasury Stock (Bal.fig.)

$900

4)

Cash (460 Shares x $104)

$47,840

Preferred Stock (460 Shares x Par Value $100)

$46,000

Additional Paid in Capital - Preferred Stock (Bal. fig.)

$1,840

5)

Retained Earnings

$89,180

Stock Dividend Payable

$89,180

Number of Common Stock Outstanding as on Stock Dividend Date = 19,200 - 1800 + 800 = 18,200 Shares)

Numbe of Shares Issued in Stock Dividend = 18,200*10% = 1820 Shares

Market Value of Shares = 1820 Share x $49 = $89,180

6)

Stock Dividend Payable

$89,180

   Common Stock (Par Value 1820*$5)

$9,100

   Additional Paid in Capital - Common Stock (Bal.fig.)

$80,080

7)

Retained Earnings

$60,380

   Dividend Payable - Preferred Stock (9*(1800+460)

$20,340

   Dividend Payable - Common Stock (18,200+1820)*$2

$40,040

Part 2 – Stockholder’s Equity

Stockholders’ Equity

$

Stockholders' Equity:

Contributed Capital:

Common Stock $5 par (96,000 shares authorized, 21,020 shares issued)

$105,100

Preferred Stock 9%, $100 par (10,000 shares authorized, 2,260 shares issued)

$226,000

Additional Paid in Capital (113,000 + 1840 + 80,080)

$194,920

Paid in Capital from Treasury Stock

$900

Retained Earnings (449,000 - 89,180 - 60,380 + 327,000)

$626,440

Less: Treasury Stock (1000 Shares x $42)

-$42,000

Total Stockholders' Equity

$1,111,360

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Event

Account Titles and Explanation

Debit

Credit

1)

Dividend Payable -- Common Stock ($2*19,200 Shares)

$38,400

Dividend Payable -- Preferred Stock ($9*1800)

$16,200

   Cash

$54,600

2)

Treasury Stock (1800 Shares x $42)

$75,600

Cash

$75,600

3)

Cash (800 Shares)

$34,500

Treasury Stock (800 Shares x Cost $42)

$33,600

Additional Paid in Capital From Treasury Stock (Bal.fig.)

$900

4)

Cash (460 Shares x $104)

$47,840

Preferred Stock (460 Shares x Par Value $100)

$46,000

Additional Paid in Capital - Preferred Stock (Bal. fig.)

$1,840

5)

Retained Earnings

$89,180

Stock Dividend Payable

$89,180

Number of Common Stock Outstanding as on Stock Dividend Date = 19,200 - 1800 + 800 = 18,200 Shares)

Numbe of Shares Issued in Stock Dividend = 18,200*10% = 1820 Shares

Market Value of Shares = 1820 Share x $49 = $89,180

6)

Stock Dividend Payable

$89,180

   Common Stock (Par Value 1820*$5)

$9,100

   Additional Paid in Capital - Common Stock (Bal.fig.)

$80,080

7)

Retained Earnings

$60,380

   Dividend Payable - Preferred Stock (9*(1800+460)

$20,340

   Dividend Payable - Common Stock (18,200+1820)*$2

$40,040

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