Question

Kingbird Company reported the following amounts in the stockholders’ equity section of its December 31, 2019, balance sheet.

Preferred stock, 9%, $100 par (10,000 shares authorized, 1,800 shares issued)		$180,000
Common stock, $5 par (92,000 shares authorized, 18,400 shares issued)		92,000
Additional paid-in capital		112,000
Retained earnings		462,000
Total		$846,000

During 2020, Kingbird took part in the following transactions concerning stockholders’ equity.

1.		Paid the annual 2019 $9 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 1,500 shares of its own outstanding common stock for $44 per share. Kingbird uses the cost method.
3.		Reissued 700 treasury shares for land valued at $31,700.
4.		Issued 540 shares of preferred stock at $106 per share.
5.		Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $43 per share.
6.		Issued the stock dividend.
7.		Declared the annual 2020 $9 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 $317,000.

Answer 1

Jopurnal Entry- Kingbird
No.	Account Titles & Explanations	Debit	Credit
1)	Dividends payable-preferred stock (1800*9)	$16,200.00
	Dividends payable - common stock (18400*2)	$36,800.00
	Cash		$53,000.00
	TO Record Dividend Paid
2)	Treasury stock (1500*44)	$66,000.00
	cash		$66,000.00
	TO Record Purchase of Treasury stock
3)	Land	$31,700.00
	Treausry stock (700*44)		$30,800.00
	Paid in capital in excess -Treasrury Stock ( BF)		$900.00
4)	Cash (540*106)	$57,240.00
	Preferred Stock (540*100)		$54,000.00
	Additional paid in Capital		$3,240.00
5)	Retained earnings ((18400-1500+700)*10%*43)	$75,680.00
	Common stock dividend distributable ((18400-1500+700)*10%*5)		$8,800.00
	Paid in capita in excess of par -Common stock (BF)		$66,880.00
6)	Common stock dividend distributable	$8,800.00
	Common Stock		$8,800.00
7)	Retained earnings	$59,780.00
	Dividend payable- common stock ((18400-1500+700+1760)*2)		$38,720.00
	Dividends payable -preferred stock ((1800+540)*9)		$21,060.00

Statement showing Stockholder Equity
Common Stock	$100,800.00
Preferred Stock	$234,000.00
Additional paid in Capital	$182,120.00
Additional paid in Capital- Treasury Stock	$900.00
Total Paid in Capital	$517,820.00
Retained Earning (273360+317000)	$590,360.00
Less: Treasury Share	-$35,200.00
Total Stock Holder Equity as on 31 Dec 2018	$1,072,980.00

Working Note

Stateement showing effet on Stockholder equity (
	Common stock	Preferred Stock	Additional paid in capital	Retained Earnings	Additional paid in capital- Treasury Stock	( Treasury Stock)	Total Shareholders’ equity
Balance at Jan.1,	$92,000.00	$180,000.00	$112,000.00	$462,000.00			$846,000.00
1				-53000			-$53,000.00
2						-$66,000.00	-$66,000.00
3					$900.00	$30,800.00	$31,700.00
4		$54,000.00	$3,240.00				$57,240.00
5				-$75,860.00			-$75,860.00
6	8800		66880				$75,680.00
7				-59780			-$59,780.00
Balance at Dec31	$100,800.00	$234,000.00	$182,120.00	$273,360.00	$900.00	-$35,200.00	$755,980.00