PR 12-3B Selected stock transactions Diamondback Welding & Fabrication Corporati

Question

PR 12-3B Selected stock transactions Diamondback Welding & Fabrication Corporation sells and services in Illinois. The following selected accounts appear in the ledger of Diamondback Welding & Fabrication at the beginning of the current year: Obj. 2, 3, 5 pipe welding equipment Preferred 2% Stock, $80 par (100,000 shares authorized, 60,000 shares issued) Paid-In Capital in Excess of Par-Preferred Stock... Common Stock, $5 par (6,000,000 shares authorized, 3,150,000 shares issued) .....15,750,000 Paid-In Capital in Excess of Par-Common Stock 210,000 1,400,000 52,840,000 During the year, the corporation completed a number of transactions affecting the stock- holders' equity. They are summarized as follows: A. Purchased 87,500 shares of treasury common for $8 per share. B. Sold 55,000 shares of treasury common for $11 per share. C. Issued 20,000 shares of preferred 2% stock at $84. D. Issued 400,000 shares of common stock at $13, receiving cash. E. Sold 18,000 shares of treasury common for $7.50 per share. F. Declared cash dividends of $1.60 per share on preferred stock and $0.03 per share on common stock. G. Paid the cash dividends. Instructions Journalize the entries to record the transactions. Identify each entry by letter.

Explanation / Answer

JOURNAL ENTRY Ref Account title and explanation Debit Credit A Treasury- common stock $              700,000 (87500*8) Cash $              700,000 (To record purchase of 87500 common shares at $8 per share for cash) B Cash $              605,000 (55000*11) Paid in capital in excess of par-Common stock $              165,000 (55000*(11-8) Treasury stock $              440,000 (55000*8) (To redord sale of 55000 treasury common stock at $11 per share) C Cash $          1,680,000 (20000*$84) Preferred 2% stock, $80 par $          1,600,000 (20000*80) Paid in capital in excess of par-Preferred stock $                80,000 (20000*(84-80) (To record issue of 20,000 2% preferred stock at$84 ) D Cash $          5,200,000 (400000*13) Paid in capital in excess of par-Common stock $          3,200,000 (400000*(13-5) Common stock $5 par $          2,000,000 (400000*5) (To record issue of 400000 common share at $13 per share) E Cash $              135,000 (18000*7.5) Paid in capital in excess of par-Common stock 9000 (18000*(8-7.5) Treasury stock $              144,000 (18000*8) (To redord sale of 18000 treasury common stock at $7.5 per share) F Retained Earnings $              234,065 Dividend payable-Preferred stock$1.6 per share $              128,000 (60000+20000)*$1.6 Dividend payable-common stock $0.03 per share $              106,065 (3150000-87500+55000+400000+18000)*0.03 (To record declaration of dividend) G Dividend payable-Preferred stock$1.6 per share $              128,000 Dividend payable-common stock $0.03 per share $              106,065 Cash $              234,065

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