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, 320 shares of preferred stock and 4,200 shares of common stock have been issued. The following transactions affect stockholders' equity during 2018 March 1 Issues 1,300 shares of common stock for $44 per share May 15 Purchase 420 shares of treasury stock for $37 per share July 10 Reissues 220 shares of treasury stock purchased on May 15 for $42 per share October 15 Issues 220 shares of preferred stock for $47 per share. December 1 Declare a cash dividend on both common and preferred stock of $0.70 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 5 Donnie Hilfiger has the following beginning balances in its stockholders' equity accounts on January 1, 2018: Preferred Stock, $320; Common Stock, $42; Additional Paid-in Capital, $77,000; and Retained Earnings, $30,900. Net income for the year ended December 31, 2018, is $11,200.

Explanation / Answer

Journal Entries Date Account Title and explanation Debit Credit Mar-01 Cash Account $57,200.00         To Share Capital (1300 Shares X $ 0.01) $13.00         To Excess of capital over par value $57,187.00 (Being share are issued at premium) May - 015 Share Capital $4.20 Excess of Capital over par value $15,535.80         To Cash Account $15,540.00 (Being share are buy-back for treasury) Jul-10 Cash Account $9,240.00         To Share Capital (220 Shares X $ 0.01) $2.20         To Excess of capital over par value $9,237.80 (Being share are issued at premium) Oct-15 Cash Account $10,340.00         To Preferred Stock (220 Shares X $ 1) $220.00         To Excess of capital over par value $10,120.00 (Being Preferred Stock are issued at premium) Dec-01 Dividend Account $3,710.00           To Dividend Payable $3,710.00 (Being dividend is declared) Dec-31 Dividend Payable $3,710.00           To Cash Account $3,710.00 (Being dividend is paid) Common Stocks                     4,200.00 Add: Issued as on march -01                     1,300.00 Less : Purchase                         420.00 Add: Reissues                         220.00 Total Shares                     5,300.00 Dividend declared @ $ 0.70 per shares                     3,710.00 Answer = 2 Transaction Total Assets Total Liabilities Total Shareholders Equity Issue Of common Stock + + Repurchase of Treasury Stock - - Reissue of treasury Stock + + Issue of preferred Stock + + Declare Cash Dividends + - Pay Cash Dividends - -

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