Question

Major League Apparel has two classes of stock authorized: 4%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during 2021, its first year of operations:

January		2		Issue 120,000 shares of common stock for $59 per share.
February		14		Issue 49,000 shares of preferred stock for $13 per share.
May		8		Purchase 12,000 shares of its own common stock for $49 per share.
May		31		Resell 6,000 shares of treasury stock for $54 per share.
December		1		Declare a cash dividend on its common stock of $0.55 per share and a $19,600 (4% of par value) cash dividend on its preferred stock payable to all stockholders of record on December 15. The dividend is payable on December 30. (Hint: Dividends are not paid on treasury stock.)
December		30		Pay the cash dividends declared on December 1.

Required:

1. Record each of these transactions. (If no entry is required for a particular transaction, select "No Journal Entry Required" in the first account field.)

2. Prepare the stockholders’ equity section of the balance sheet as of December 31, 2021. Net income for the year was $479,000. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

1)

02-Jan-21	Cash	Debit	$        7,080,000
	Common Stock	Credit	$            120,000
	Additional Paid in Capital - Common Stock	Credit	$        6,960,000
14-Feb-21	Cash	Debit	$            637,000
	Preference Stock	Credit	$            490,000
	Additional Paid in Capital - Preference Stock	Credit	$            147,000
08-May-21	Treasury Stock	Debit	$            588,000
	Cash	Credit	$            588,000
31-May-21	Cash	Debit	$            324,000
	Treasury Stock	Credit	$            294,000
	Additional Paid in Capital - Treasury Stock	Credit	$              30,000
01-Dec-21	Retained Earnings	Debit	$              79,000
	Dividend Payable	Credit	$              79,000
	(0.55 * 108000) + 19600
31-Dec-21	Dividend Payable	Debit	$              79,000
	Cash	Credit	$              79,000

Stockholders Equity
Paid in Capital
Common Stock		$            120,000
Additional Paid in Capital - Common Stock		$        6,960,000
Preference Stock		$            490,000
Additional Paid in Capital - Preference Stock		$            147,000
Additional Paid in Capital - Treasury Stock		$              30,000
Total Paid-in Capital		$        7,747,000
Add: Retained Earnings		$            479,000
Subtotal		$        8,226,000
Less: Treasury Stock (6000* 49)		$            294,000
Less : Dividend		$              79,000
Balance		$        7,853,000