Question

Macondo, Inc. is a wholesaler located in Aguadilla. During its current fiscal year, ended December 31, 2019, Macondo Inc. completed the following selected transactions:

Feb. 3 Purchased 2,500 shares of its own common stock at $26, recording the stock at cost. (Prior to the purchase, there were 40,000 shares of $20 par common stock outstanding.

May 1 Declared a semiannual dividend of $1 on the 10,000 shares of preferred stock a $.30 dividend on the common stock to stockholders of record on May 31, payable on June 15.

June 15 Paid the cash dividends.

Sept. 23 Sold 1,000 shares of treasury stock at $28, receiving cash.

Nov. 1 Declared semiannual dividends of $1 on the preferred and $.30 declared on the common stock, In addition, a 5% common stock dividend was declared on the common stock outstanding, to be capitalized at the fair market value of the common stock, which is estimate at $30.

Dec. 1 Paid the cash dividends and issued the certificates for the common stock dividend.

Instructions: Journalize the transactions.

Answer 1

Journal Entries:

Date	Account title and Explanation	Debit	Credit
Feb 3	Treasury stock [2500 x $26]	$65,000
	Cash		$65,000
	[To record purchase of own shares]
May 1	Retained earnings		$21,250
	Dividends payable-Preferred [10,000 x $1]
	Dividends payable-Common [(40,000-2,500) x $0.30]
	[To record declaration of cash dividends]
June 15	Dividends payable-Preferred	$10,000
	Dividends payable-Common	$11,250
	Cash		$21,250
	[To record payment of cash dividends]
Sept. 23	Cash [100 x $28]	$2,800
	Treasury stock [100 x $26 cost]		$2,600
	Paid in excess from treasury stock		$200
	[To record sale of treasury stock]
Nov.1	Retained earnings	$77,680
	Dividends payable-Preferred [10,000 x $1]		$10,000
	Dividends payable-Common [(40,000-2,500+100) x $0.30]		$11,280
	Common stock dividend distributable [(40,000-2,500+100) x 5% x $20 par]		$37,600
	Paid-in capital in excess of par-common [(40,000-2,500+100) x 5% x (30$ - $20 par)]		$18,800
	[To record declaration of cash dividends and Stock dividend]
Dec. 1	Dividends payable-Preferred	$10,000
	Dividends payable-Common	$11,280
	Common stock dividend distributable	$37,600
	Cash [10000+11280]		$21,280
	Common stock		$37,600
	[To record payment of cash dividends and issuance of common stock for stock dividends]