Question

During 2022, the following transactions occurred.

1.		On January 1, Sheffield issued 2,520 shares of $40 par, 7% preferred stock for $103,320.
2.		On January 1, Sheffield also issued 1,890 shares of the $10 par value common stock for $44,100.
3.		Sheffield performed services for $672,000 on account.
4.		On April 1, 2022, Sheffield collected fees of $75,600 in advance for services to be performed from April 1, 2022, to March 31, 2023.
5.		Sheffield collected $579,600 from customers on account.
6.		Sheffield bought $73,710 of supplies on account.
7.		Sheffield paid $67,620 on accounts payable.
8.		Sheffield reacquired 840 shares of its common stock on June 1 for $28 per share.
9.		Paid other operating expenses of $395,220.
10.		On December 31, 2022, Sheffield declared the annual preferred stock dividend and a $1.20 per share dividend on the outstanding common stock, all payable on January 15, 2023.
11.		An account receivable of $3,570 which originated in 2022 is written off as uncollectible. Prepare journal entries for the transactions listed above and adjusting entries. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Record journal entries in the order presented in the problem.)

Answer 1

1. Bank A/c                                                                                              Dr.          103,320

To Share Application & Allotment Money A/c                                                      103,320

(Being Application & Allotment money received for 2,520 shares issued @$41 each having face value $40 each.)

                Share Application & Allotment Money A/c                            Dr.          103,320

                                To Share Capital A/c (2,520*40)                                                                                 100,80

                                To Securities Premium A/c (2,520*1)                                                                       2,520

(Being Share Allotment money transferred to Share Capital A/c and Securities Premium booked.)

2. Bank A/c                                                                                              Dr.          44,100

To Share Application & Allotment Money A/c                                                      44,100

(Being Application & Allotment money received for 1,890 shares issued @$23.33 each having face value $10 each.)

                Share Application & Allotment Money A/c                            Dr.          44,100

                To Share Capital A/c (1,890*10)                                                                                 18,900

To Securities Premium A/c (44,100-18,900)                                                           25,200

(Being Share Allotment money transferred to Share Capital A/c and Securities Premium booked.)

3. Party A/c (Debtor’s A/c)                                                                 Dr.          672,000

                To Service A/c (Revenue A/c)                                                                                     672,000

(Being Service provided and income booked)

4. Bank A/c                                                                                              Dr.          75,600

To Advance Received A/c (or Party A/c)                                                                 75,600

(Being Advance received for services to be rendered in next Financial Year.)

5. Bank A/c                                                                                              Dr.          579,600

To Party A/c (Debtor/Customer A/c)                                                                       579,600

(Being amount collected from customer on account)

6. Supplies A/c (Asset A/c of item purchased)                           Dr.          73,710

To Party A/c (Creditor/Supplier A/c)                                                                        73,710

(Being supplies bought on account.)

7. Party A/c (Accounts Payable/Creditor A/c)                            Dr.          67,620

To Bank A/c                                                                                                                        67,620

                (Being amount paid to accounts payable.)

8. Share Capital A/c (840*10)                                                           Dr.          8,400

Securities Premium Reserve A/c (840*18)                              Dr.          15,120

                To Shareholders A/c (840*28)                                                                                     23,520

(Being Shares cancelled & premium paid on redemption booked.)

Shareholders A/c                                                                             Dr.          23,520

To Bank A/c                                                                                                                        23,520

(Being the shareholders paid on account of buyback)

Securities Premium A/c (840*10)                                               Dr.          8,400

                To Capital Redemption Reserve A/c                                                                         8,400

(Being Capital Redemption Reserve A/c created)

9. Other Operating Expenses A/c                                                   Dr.          395,220

To Bank A/c                                                                                                                        395,220

                (Being Other Expenses Paid.)

10. Dividend declared A/c                                                                    Dr.          8,316

[(2,520*40*7%) + (1,890-840)*1.2]

                To Dividend Payable A/c                                                                                               8,316

(Being Dividend declared)

11. Bad-debts A/c (Expenses A/c)                                                     Dr.          3,520

To Party A/c (Account Receivable A/c)                                                                    3,520

(Being An account receivable of $3,570 which originated in 2022 is written off as uncollectable.)

Notes to accounts –

1. Party A/c is used for Account Payable and Account Receivables as the name of them were not mentioned.

2. Financial Year is assumed to ending on 31st March of every year.