On January 5, 2017, Phelps Corporation received a charter granting the right to
ID: 2559687 • Letter: O
Question
On January 5, 2017, Phelps Corporation received a charter granting the right to issue 5,000 shares of $50.00 par value, 14% cumulative and nonparticipating preferred stock, and 50,000 shares of $10.00 par value common stock. It then completed these transactions. Jan 11 Issued 20,000 shares of common stock at $20 per share. Feb 1 Issued to Sanchez Corp. 5,000 shares of preferred stock for the following: Equipment with a fair market value of $60,000 A factory building with a fair market value of $180,000 and, land with an appraised value of $250,000 Jul 29 Purchased 1,600 shares of common stock at $19 per share. (Use the cost method.) Aug 10 Sold the 1,500 treasury shares at $14 per share. Dec 15 Declared a 10% stock dividend for common stockholders. Stock price is $58 per share. Shares are issed. Dec 31 Declared a $0.22 per share cash dividend on the common stock and declared the preferred dividend. Dec 31 Closed the Income Summary account. There was a $186,700 net income. Instructions: (a) Record the journal entries for the transactions listed above. (b) Prepare the stockholders' equity section of Phelps Corporation's balance sheet as ofDecember 31, 2017. PHELPS CORPORATION Stockholders' Equity December 31, 2017 Capital Stock Total capital stock Additional Paid-in Capital Total paid-in capital Total stockholders’ equity On January 5, 2017, Phelps Corporation received a charter granting the right to issue 5,000 shares of $50.00 par value, 14% cumulative and nonparticipating preferred stock, and 50,000 shares of $10.00 par value common stock. It then completed these transactions. Jan 11 Issued 20,000 shares of common stock at $20 per share. Feb 1 Issued to Sanchez Corp. 5,000 shares of preferred stock for the following: Equipment with a fair market value of $60,000 A factory building with a fair market value of $180,000 and, land with an appraised value of $250,000 Jul 29 Purchased 1,600 shares of common stock at $19 per share. (Use the cost method.) Aug 10 Sold the 1,500 treasury shares at $14 per share. Dec 15 Declared a 10% stock dividend for common stockholders. Stock price is $58 per share. Shares are issed. Dec 31 Declared a $0.22 per share cash dividend on the common stock and declared the preferred dividend. Dec 31 Closed the Income Summary account. There was a $186,700 net income. Instructions: (a) Record the journal entries for the transactions listed above. (b) Prepare the stockholders' equity section of Phelps Corporation's balance sheet as of
December 31, 2017. PHELPS CORPORATION Stockholders' Equity December 31, 2017 Capital Stock Total capital stock Additional Paid-in Capital Total paid-in capital Total stockholders’ equity
Explanation / Answer
Date/S.N. Account title & Explanation Debit Credit Amount in $ Amount in $ Jan-11 Cash 400000 Common stock (20000*10) 200000 Paid in capital in excess of par(common stock) 200000 To record the issuance of common stock @20 per share Feb-01 Equipment 60000 Building 180000 Land 250000 preferred stock (5000*50) 250000 Paid In capital in excess of par(Preferred stock) 240000 To record the issuance of preferred stock for acquistion of asset Jul-29 Treasury stock (1600*19) 30400 Cash 30400 To record the purchase of common stock @19 per share Aug-10 Cash (1500*14) 21000 Retained earning(1500*4) 7500 Treasury stock(1500*19) 28500 To record the issuance of treasury stock @ 14 per share Dec-15 Retained earning(1990*58) 115420 Common stock dividend Distributable 19900 paid in capital in excess of par(common stock) 95520 Common stock dividend Distributable 19900 Common stock 19900 To record the issuance of stock dividend Dec-31 Cash dividend (21890*0.22) 4815.8 Dividend Payable 4815.8 Preferred Dividend(250000*14%) 35000 Dividend Payable 35000 Retained Earnings 39815.8 Cash dividend (21890*0.22) 4815.8 Preferred Dividend(250000*14%) 35000 To record the declaration of dividendon common as well as preferred stock Dec-31 Income summery 186700 Retained earnings 186700 To record the transfer of Net Income to retained earnings Stock holder's Equity December 31, 2017 Capital stock Common stock of 21890 at $10 per share 218900 Preferred stock of 5000 at $50 per share 250000 Total capital stock 468900 A Additional Paid in Capital Additional Paid in capital in excess of par Common stock 295520 Additional Paid in capital in excess of par Preferred stock 240000 Total Paid in capital 535520 B Retained Earning 31464.2 C Less : Treasury stock(100*19) 1900 D Total stockholder's equity 1033984 A+B+C-D
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