Question

Hobbie Craft industries was authorized to issue 1,000,000 shares of $3 par common stock, and 300,000 shares of 6% $50 par, "cumulative" and non-participating preferred stock. Presented below, is information pertaining to their first 2 years of operation:

2008:

Jan 3rd Issued 400,000 shares of common at $11 per share

Jan 4th Issued 80,000 shares of preferred at $100 per share

May 1st Exchange 20,000 shares of common for land having a current appraised market value of $260,000

Dec 31st Net Income for 2007 totaled $404,500

Dec 31st No dividends were declared 2008

Mar 25th Declared and distributed a 5% stock dividend on common stock. The stock was selling for $16 per share when the stock dividend was declared

May 1st Purchase 50,000 of their own common stock (treasure stock) for $10 per share

August 1st sold 30,000 shares of treasure stock for $14 per share

Nov 30th Declared a 20 cent per share dividend on common

Dec 31st net income for 2008 totaled $1,280,465

Prepare the T Accounts and Stockholders' Equity section at December 31, 2009

Answer 1

	Journal Entries
date	explanation	debit	credit
3-Jan	cash	4400000
	common stock		1200000
	additional paid in capital-common stocl		3200000
4-Jan	cash	8000000
	preferred stock		4000000
	additional paid in capital - preferred stock		4000000
1-May	land	260000
	common stock		60000
	additional paid in capital-common stocl		200000
mar 25 2009	retained earning	336000
	common stock		63000
	additional paid in capital-common stocl		273000
1-May	treasury stock	500000
	cash		500000
1-Aug	cash	420000
	treasury stock		300000
	additional paid in capital- treasury stock		120000
30-Nov	retained earning	84200
	cash		84200
		T-Accounts
		addional pain in capital-common stock
31-Dec	balance	3400000	3-Jan	cash	3200000
			1-May	land	200000
	total	3400000		total	3400000
			1-Jan	balance	3400000
31-Dec	balance	3673000	mar 25 2009	retained earning	273000
	total	3673000	total		3673000
		preferred stock
31-Dec	balance	4000000	4-Jan	cash	4000000
########	balance	4000000	jan 1 2009	balance	4000000
		additional paid in capital - preferred stock
31-Dec	balance	4000000	4-Jan	cash	4000000
########	balance	4000000	jan 1 2009	balance	4000000
		treasury stock
may 1 2009	cash	500000	1-Aug	cash	300000
			31-Dec	balance	200000
	total	500000		total	500000
		additional paid in capital- treasury stock
31-Dec	balance	120000	1-Aug	cash	120000
		common stock
31-Dec	balance	1260000	3-Jan	cash	1200000
			1-May	land	60000
	total	1260000		total	1260000
31-Dec	balance	1323000	1-Jan	balance	1260000
			25-Mar	retained earning	63000
	total	1323000		total	1323000
		cash
3-Jan	common stock	1200000	31-Dec	balance	12400000
3-Jan	additional paid in capital-common stocl	3200000
4-Jan	preferred stock	4000000
4-Jan	additional paid in capital - preferred stock	4000000
	total	12400000	total		12400000
1-Jan	balance	12400000	1-May	treasury stock	500000
1-Aug	treasury stock	300000	30-Nov	retained earning	84200
1-Aug	additional paid in capital- treasury stock	120000	31-Dec	balance	12235800
	total	12820000		total	12820000
		land
1-May	common stock	60000	31-Dec	balance	260000
1-May	additional paid in capital-common stocl	200000
	total	260000		total	260000
dec 31 2009	balance	260000	jan 1 2009	balance	260000
statement of shareholders equity
Dec 31 2009
common stock		1323000
preferred stock		4000000
additional paid In capital common stock		3673000
additional paid in capital on preferred stocl		4000000
additional paid in capital on treasury stock		120000
total paid up capital			13116000
less treasury stock			200000
retained earning	(1280465-336000-84200)		860265
total of shareholders equity			13776265

No of common stock for bonus shares = (400000+20000)+(420000*5%) = 441000

No of stock after sale of treasury stock = 441000-20000 = 421000