The following selected accounts appear in the ledger of Parks Construction Inc.

Question

The following selected accounts appear in the ledger of Parks Construction Inc. at the beginning of the current year:

Preferred 2% Stock, $75 par (100,000 shares authorized, 80,000 shares issued) $6,000,000

Paid-In Capital in Excess of Par—Preferred Stock 420,000

Common Stock, $8 par (5,000,000 shares authorized, 3,000,000 shares issued) 24,000,000

Paid-In Capital in Excess of Par—Common Stock 1,850,000

Retained Earnings 115,400,000

During the year, the corporation completed a number of transactions affecting the stockholders’ equity. They are summarized as follows:

Jan. 5 Issued 400,000 shares of common stock at $11, receiving cash.

Feb. 10 Issued 5,000 shares of preferred 2% stock at $90.

Mar. 19 Purchased 150,000 shares of treasury common for $10 per share.

May 16 Sold 80,000 shares of treasury common for $13 per share.

Aug. 25 Sold 20,000 shares of treasury common for $9 per share.

Dec. 6 Declared cash dividends of $1.50 per share on preferred stock and $0.06 per share on common stock.

31 Paid the cash dividends.

Journalize the entries to record the transactions. Refer to the Chart of Accounts for exact wording of account titles.

Explanation / Answer

In the books of Parks Construction Inc.:

Date Account Titles Debit Credit $ $ Jan 5 Cash 4,400,000 Common Stock 3,200,000 Paid-in Caital in Excess of Par : Common Stock 1,200,000 Feb 10 Cash 450,000 Preferred Stock 375,000 Paid-in Capital in Excess of Par : Preferred Stock 75,000 March 19 Treasury Stock 1,500,000 Cash 1,500,000 May 16 Cash 1,040,000 Treasury Stock 800,000 Paid-in Capital : Treasury Stock 240,000 Aug 25 Cash 180,000 Paid-in Capital: Treasury Stock 20,000 Treasury Stock 200,000 Dec 6 Retained Earnings 328,500 Dividends Payable : Preferred Stock 127,500 Dividends Payable : Common Stock 201,000 Dec 31 Dividends Payable : Preferred Stock 127,500 Dividends Payable : Common Stock 201,000 Cash 328,500

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