Question

Required information

Problem 10-6A Record equity transactions and prepare the stockholders' equity section (LO10-2, 10-3, 10-4, 10-5, 10-7)

[The following information applies to the questions displayed below.]

Major League Apparel has two classes of stock authorized: 5%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during 2021, its first year of operations:

January		2		Issue 100,000 shares of common stock for $58 per share.
February		14		Issue 48,000 shares of preferred stock for $11 per share.
May		8		Purchase 10,000 shares of its own common stock for $48 per share.
May		31		Resell 5,000 shares of treasury stock for $53 per share.
December		1		Declare a cash dividend on its common stock of $0.60 per share and a $24,000 (5% 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.

Problem 10-6A Part 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.)

• Record the issuance of 100,000 shares of common stock for $58 per share.

• Note: Enter debits before credits.

  	Date General Journal Debit Credit January 02, 2021

• Record the issuance of 48,000 shares of preferred stock for $11 per share.

Note: Enter debits before credits.

	Date General Journal Debit Credit February 14, 2021

• Record the purchase of 10,000 shares of its own common stock for $48 per share.

Note: Enter debits before credits.

	Date General Journal Debit Credit May 08, 2021

• Record the resell of 5,000 shares of treasury stock for $53 per share.

Note: Enter debits before credits.

	Date General Journal Debit Credit May 31, 2021

• Record the declaration of a cash dividend on its common stock of $0.60 per share and a $24,000 (5% of par value) cash dividend on its preferred stock payable to all stockholders. The dividend is payable on December 30. (Hint: Dividends are not paid on treasury stock.)

Note: Enter debits before credits.

	Date General Journal Debit Credit December 01, 2021

• Record the declaration of a cash dividend payable to stockholders of record on December 15.

Note: Enter debits before credits.

	Date General Journal Debit Credit December 15, 2021

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

Note: Enter debits before credits.

	Date General Journal Debit Credit December 30, 2021

Answer 1

Ans: Journal Entries

Date	Account title and explanation	Debit{$}	Credit{$}
2 Jan,2021	Cash{100,000*58}	5,800,000
	Common stock		100,000
	Additional-paid in capital - common stock		5,700,000
	{ to record issuance of shares@58 per share}
14 Feb,2021	Cash{48,000*11}	528,000
	Preference Stock		480,000
	Additional Paid in Capital- preference Stock		48,000
	{ to record issuance of preferred stock@11 per share}
May 8,2021	Treasury Stock{10,000*$48}	480,000
	Cash		480,000
	(to record purchase of shares@48 per share}
May 31,2021	Cash(5,000*53)	265,000
	Treasury Stock(48*5000)		240,000
	Additional paid in capital-Treasury Stock		25,000
	( to record resell of treasury Stock)
Dec 1,2021	Retained Earnings(0.60*90,000**)+24,000	78,000
	Dividends Payable		78,000
	(to record declaration of cash dividend)
Dec 30,2021	Dividends Payable	78,000
	Cash		78,000
	( to record payment of cash dividends)

**= 100,000-10,000

=90,000 shares