Question

 

Major League Apparel has two classes of stock authorized: 6%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during 2018, its first year of operations:

January 2 Issue 110,000 shares of common stock for $67 per share.

February 14 Issue 57,000 shares of preferred stock for $12 per share.

May 8 Repurchase 11,000 shares of its own common stock for $57 per share.

May 31 Reissue 5,500 shares of treasury stock for $62 per share.

December 1 Declare a cash dividend on its common stock of $0.40 per share and a $34,200 (6% 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.)

Issue 110,000 shares of common stock for $67 per share.

• Issue 57,000 shares of preferred stock for $12 per share.

• Repurchase 11,000 shares of its own common stock for $57 per share.

• Reissue 5,500 shares of treasury stock for $62 per share.

• Record the declaration of cash dividends.

• Record the entry on the date of record.

• Pay the cash dividends declared on December 1. Record the payment of cash dividends.

Answer 1

Date	Account Titles and Explanation	Debit	Credit
Jan-02	Cash (110,000 x $67)	$ 7,370,000
	Common Stock (110,000 x $1)		$     110,000
	Additional Paid-in Capital - Common Stock ($7,370,000-$110,000)		$ 7,260,000
	(To record the issue of common stock)
Feb-14	Cash (57,000*$12)	$     684,000
	Preferred Stock (57,000*$10)		$     570,000
	Additional Paid-in Capital - Preferred Stock ($684,000-$570,000)		$     114,000
	(To record the issue of preferred stock)
May-08	Treasury Stock (11,000*$57)	$     627,000
	Cash		$     627,000
	(To record the purchase of treasury stock)
May-31	Cash (5,500*$62)	$     341,000
	Treasury Stock ( 5,500*$57)		$     313,500
	Paid-in Capital - Treasury Stock ($34,100-$31,350)		$       27,500
	(To record the sale of treasury stock)
Dec-01	Retained Earnings ($34,200 + $41,800)	$       76,000
	Dividends Payable - Preferred Stock		$       34,200
	Dividends Payable - Common Stock [(110,000-11,000+5,500)*$0.40]		$       41,800
	(To record the dividends declared)
Dec-15	No Entry Required
Dec-30	Dividends Payable - Preferred Stock	$       34,200
	Dividends Payable - Common Stock	$       41,800
	Cash		$       76,000
	(To record the dividends paid)