Question

Headland Company reported the following amounts in the stockholders’ equity section of its December 31, 2019, balance sheet. Preferred stock, 10%, $100 par (10,000 shares authorized, 1,900 shares issued) $190,000 Common stock, $5 par (101,000 shares authorized, 20,200 shares issued) 101,000 Additional paid-in capital 125,000 Retained earnings 431,000    Total $847,000 During 2020, Headland took part in the following transactions concerning stockholders’ equity. 1. Paid the annual 2019 $10 per share dividend on preferred stock and a $2 per share dividend on common stock. These dividends had been declared on December 31, 2019. 2. Purchased 1,800 shares of its own outstanding common stock for $43 per share. Headland uses the cost method. 3. Reissued 700 treasury shares for land valued at $31,600. 4. Issued 530 shares of preferred stock at $104 per share. 5. Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $47 per share. 6. Issued the stock dividend. 7. Declared the annual 2020 $10 per share dividend on preferred stock and the $2 per share dividend on common stock. These dividends are payable in 2021.

Prepare journal entries to record the transactions described above.

Prepare the December 31, 2020, stockholders’ equity section. Assume 2020 net income was $314,000. (Enter account name only .Do not provide any descriptive information.)

Answer 1

S.No.	General, Journal	Debit	Credit
1)	Dividend Payable-Common Stock(20200*2)	$ 40,400
	Dividend Payable-Preferred Stock(1900*$10)	$ 19,000
	Cash		$59,400
2)	Treasury Stock(1800*$43)	$ 77,400
	Cash		$77,400
3)	Land	$ 31,600
	Treasury Stock (700 *$43)		$30100
	Paid in capital excess for treasury stock		$ 1,500
4)	Cash (530*104)	$ 55120
	Preferred Stock (530*$100)		$ 53,000
	Paid in Capital excess of par-Preferred stock		$ 2120
5)	Retained Earnings ((20200-1800+700) *0.10*47)	$ 89770
	Common Stock Dividend Distributable(1910*$5)		$ 9550
	Paid in Capital excess of par -common stock		$ 80220
	(Being declared a 10% stock dividend on the outstanding common stock)

6)	Common Stock dividend distributable	$   9,550
	Common Stock		$   9,550
	(Being amount of dividend distributed)
7)	Retained Earnings	$ 66320
	Dividend Payable-Preferred Stock(1900+530)*$10		$ 24300
	Dividend Payable-Common Stock=(20200-1800+700+1910)*$2		$ 42020

Stockholders Equity as on 31st December 2017
Preferred stock, 10% $ 100 par (10,000 shares authorised, 2430 shares issued)		$243,000
Common stock, $ 5 par (101000 shares authorised, 22110 shares issued and 21010 outstanding)		$110,550		(22110*5)
Total capital stock		$353,550
Additional paid-in capital		$208840		(125000+1500+2120+80220)
Total Paid-in Capital		$562390
Retained Earnings		$588910		(431000+314000-89770-66320)
Total paid-in capital and retained earnings		$1,151,300
Less : Cost of treasury stock		($47300)		(77400-30100)
Total Stockholders Equity		$1,104,000