Nicole has been financing Nicole’s Getaway Spa (NGS) using equity financing. Cur

Question

Nicole has been financing Nicole’s Getaway Spa (NGS) using equity financing. Currently NGS has authorized 100,000 no-par preferred shares and 200,000 $2 par common shares. Outstanding shares include 51,000 preferred shares and 41,000 common shares.

Prepare the journal entries needed for each of the transactions. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

On November 12, the board of directors declares a $0.20 cash dividend on each outstanding preferred share.

The dividend is paid December 20.

1

Record the issuance of 1,050 shares of preferred stock with no par value for a price of $11 per share.

2

Record the purchase of 1,050 previously issued common shares for a price of $10 per share.

3

Record the declaration of a $0.20 cash dividend on the shares of preferred stock outstanding.

4

Record the payment of the cash dividend to the preferred shareholders.

Required: 1.

Prepare the journal entries needed for each of the transactions. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Explanation / Answer

Journal entries :

date accounts & explanation debit credit Cash a/c (1050*11) 11550      Preferred shares a/c 11550 (To record issue of preferred shares) Treasury stock a/c (1050*10) 10500      Cash a/c 10500 (To record treasury stock purchased) Nov 12 Preferred Dividend a/c (51000+1050)*.0.20 10410      Preferred dividend payable a/c 10410 (TO record dividend declaration) Dec 20 Preferred dividend payable a/c 10410      Cash a/c 10410 (To record dividend paid)

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