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In: Accounting

The stockholders equity accounts of Warden Corporation on January 1, 2014, were as follows. Preferred stock...

The stockholders equity accounts of Warden Corporation on January 1, 2014, were as follows.

Preferred stock (9%, $50 par cumulative, 10000 shares authorized) $200000

Common stock ($1 stated value, 2000000 shares authorized) 100000

Paid-in capital in Excess of Par value-Preferred stock $16000

Paid in Capital in Excess of Stated Value-Common stock $1400000

Retained Earnings $1716000

Treasury Stock (8000 common shares) $20000

During 2014 the corporation had these transactions and events pertaining to its stockholders' equity

Feb 1. Issued 20000 shares of common stock for $160000

Nov 10. Purchased 4000 shares of common stock for the treasury at a cost of $16000

Nov 15. Declared a 9% cash dividend on preferred stock, payable December 15.

Dec 1. Declared a $.30 per share cash dividend to common stockholders of record on December 15, payable Dec 31, 2014

Dec 15. Paid the dividend declared on November 15.

Dec 31. Determined that net income for the year was $408000. The market price of the common stock on this date was $5 per share. Paid the dividend declared on December 1.

a) Journalize the transactions. (Include entries to close net income and dividends to Retained Earnings)

Solutions

Expert Solution

Journal entry:
S.no. Accounts title and explanations Debit $ Credit $
a. Cash 160000
   Common Stock capital 20000
   Paid in capital in excess of par 140000
(for issuance of stock for Cash)
b. Treasury stock 16000
     Cash account 16000
(for purchase of treasury stock)
c. Dividend account 18000
    Preferred dividend Payable (200,000*9%) 18000
(for dividend declared)
d. Dividend account 34800
    Common Dividend payable (116000*0.30) 34800
(for dividend declared)
e. Preferred dividend payable 18000
    Cash 18000
(for preferred dividend paid)
f. Common Dividend payable 34800
    Cash 34800
(for common dividend paid)
g. Income summary 408000
    Retained earnings 408000
(for closing the net income)
h. Retained earnings (18000+34800) 52800
     Dividend account 52800
(for closing the dividend account)

ekkarill92 answered 2 years ago
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