Question

The shareholders’ equity section of Superior Corporation’s balance sheet as of December 31, 2015, is as follows: Shareholders’ Equity Preferred stock, $100 par value; authorized, 300,000 shares; issued, 33,000 shares $3,300,000 Common stock, $5 par value; authorized, 2,000,000 shares; issued, 377,000 shares 1,885,000 Paid-in capital in excess of par—preferred 96,000 Paid-in capital in excess of par—common 825,000 Retained earnings 2,920,000 $9,026,000 The following events occurred during 2016: Jan. 5 10,500 shares of authorized and unissued common stock were sold for $7 per share. 16 10,000 shares of authorized and unissued preferred stock were sold for $108 per share. Apr. 1 79,000 shares of common stock were repurchased for the treasury at a price of $21 per share. Superior uses the cost method to account for treasury stock. Sept. 1 3,500 shares of preferred stock are issued in exchange for a piece of land. The land has an appraised value of $389,500. The preferred stock currently trades on the New York Stock Exchange at a price of $109 per share. Dec. 1 24,000 shares of treasury stock are reissued at a price of $24 per share.

Required: 1. Prepare journal entries for each of the above transactions.

2. Calculate the number of authorized, issued, and outstanding common shares as of December 31, 2016.

3. Calculate Superior’s legal capital at December 31, 2016.

Answer 1

A	B	C	D	E	F	G
2
3		Par Value of Common Stock	$5
4		Par Value of Preferred Stock	$100
5		1)
6		If the common or preferred stock is issued for amount greater than the par value
7		then Additional Paid in capital is credit for the amount above the par value.
8
9		Journal entries will be as follows:
10		Date	Account	Debit	Credit
11		5-Jan	Bitmap Bitmap Cash (10,500*$7)	Bitmap Bitmap $73,500.00	Bitmap Bitmap
12			Bitmap Bitmap Bitmap Bitmap Common Stock (10,500*$5)	Bitmap Bitmap Bitmap Bitmap	Bitmap Bitmap Bitmap Bitmap Bitmap Bitmap $52,500.00
13			Paid-in capital in excess of par—common (10,500*($7-$5))		$21,000.00
14
15		16-Jan	Cash (10,000*$108)	$1,080,000
16			Preferred Stock (10,000*$100)		$1,000,000.00
17			Paid in capital in excess of par - Preferred Stock (10,000*($108-$100))		$80,000.00
18
19		1-Apr	Treasury Stock (79,000*$21)	$1,659,000
20			Cash		$1,659,000
21
22		1-Sep	Land	$381,500
23			Preferred Stock (3,500*$100)		$350,000.00
24			Paid in capital in excess of par - Preferred Stock (3,500*($109-$100))		$31,500.00
25
26		1-Dec	Cash (24,000*$24)	$576,000
27			Treasury Stock (24,000 shares, at cost of $21)		$504,000
28			Paid in capital - Treasury		$72,000
29
30
31		2)
32
33		Authorized Common Shares will remain same.
34		Aurthorized common shares	2,000,000
35
36		Issued Common Share on Dec 31 2015	377000
37		Common Shares issued on Jan 5	10500
38		Total common stock Issued	387500	=D36+D37
39
40		Treasury stock bought on Apr 1	79000
41		Treasury stock Sold on Dec 1	20000
42		Treasury stock Balance	59000	=D40-D41
43
44		Total common stock issued	387500
45		Treasury stock Balance	59000
46		Common Stock Outstanding	328500	=D44-D45
47