Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01

Question

Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2018, 470 shares of preferred stock and 5,700 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2018:

March 1 Issues 2,800 shares of common stock for $59 per share.

May 15 Purchase 570 shares of treasury stock for $52 per share.

July 10 Reissues 370 shares of treasury stock purchased on May 15 for $57 per share.

October 15 Issues 370 shares of preferred stock for $62 per share.

December 1 Declare a cash dividend on both common and preferred stock of $2.20 per share to all stockholders of record on December 15. (Hint: Dividends are not paid on treasury stock.)

December 31 Pay the cash dividends declared on December 1.

Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2018: Preferred Stock, $470; Common Stock, $57; Additional Paid-in Capital, $84,500; and Retained Earnings, $33,900. Net income for the year ended December 31, 2018, is $14,200.

Explanation / Answer

date Accounst Title Dr Cr 1-Mar Cash (2800*59) 165200 Additional Paid in capital 165172 Common stock (2800*.01) 28 15-May Treasury stock 29640 Cash 29640 10-Jul Cash (370*57) 21090 Additional paid in capital -Treasury stock 1850 Treasury stock (370*52) 19240 15-Oct Cash (370*28) 10360 Additional Paid in capital 9990 Common stock (370*1) 370 1-Dec Cash Dividend 20108 Dividend payable 20108 (470+5700+2800-570+370+370)*2.2 31-Dec Dividend payable 20108 Cash 20108 Retained Eraninsg 20108 Cash Dividend 20108 Stockholder Equity Preferred Stock (470+570) 1040 Common stock (5700+2800)*.01 85 Additional paid in capital (84500+165172+9990) 259662 Additional paid in capital -Treasury stock 1850 Total paid in capital 262637 Retained earnings (33900+14200-10108) 37992 Less: treasury stock (200*52) -10400 Ending stockholder equity 290229

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