On January 5, 2012, Phelps Corporation received a charter granting the right to
ID: 2589327 • Letter: O
Question
On January 5, 2012, Phelps Corporation received a charter granting the right to issue 5,000 shares of $50 par value, 14% cumulative and nonparticipating preferred stock, and 50,000 shares of $10 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 assets: equipment with a fair
value of $60,000; a factory building with a fair market value of $180,000; and land with an appraised value of
$250,000.
July 29 Purchased 1,600 shares of common stock at $19 per share. (Use cost method.)
Aug. 10 Sold the 1,500 treasury shares at $14 per share.
Dec. 15 Declared 10% stock dividend for common stockholders. Stock price is $58 per share. Shares are issed.
Dec. 31 Declared a $0.25 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.
Explanation / Answer
(a)
Workings:
(b)
Workings:
Date Account Titles and Explanation Debit Credit Jan. 11 Cash (20000 x $20) 400000 Common stock (20000 x $10) 200000 Paid-in capital in excess of par-common stock 200000 (To record issuance of common stock) Feb. 1 Equipment 60000 Factory building 180000 Land 250000 Preferred stock (5000 x $50) 250000 Paid-in capital in excess of par-preferred stock 240000 (To record issuance of preferred stock for assets) Jul. 29 Treasury stock (1600 x $19) 30400 Cash 30400 (To record purchase of treasury stock) Aug. 10 Cash (1500 x $14) 21000 Retained earnings (1500 x $5) 7500 Treasury stock (1500 x $19) 28500 (To record sale of treasury stock) Dec. 15 Retained earnings (1990 x $58) 115420 Common stock [10% x (20000-1600+1500) x $10) 19900 Paid-in capital in excess of par-common stock 95520 (To record declaration and issue of stock dividend) Dec. 31 Retained earnings 40472.50 Dividends payable 40472.50 (To record declaration of cash dividend) Dec. 31 Income summary 186700 Retained earnings 186700 (To close income summary to retained earnings)Related Questions
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