Question

Exercise 15-18 (Part Level Submission)
Pharoah Company reported the following amounts in the stockholders’ equity section of its
December 31, 2016, balance sheet.
Preferred stock, 10%, $100 par (10,000 shares authorized, 2,000 shares issued)
$200,000
Common stock, $5 par (107,000 shares authorized, 21,400 shares issued)
107,000
Additional paid-in capital
127,000
Retained earnings
491,000
Total
$925,000
During 2017, Pharoah took part in the following transactions concerning stockholders’ equity.
1. Paid the annual 2016 $10 per share dividend on preferred stock and a $2 per share dividend on
common stock. These dividends had been declared on December 31, 2016.
2. Purchased 1,800 shares of its own outstanding common stock for $41 per share. Pharoah uses
the cost method.
3. Reissued 800 treasury shares for land valued at $33,700.
4. Issued 520 shares of preferred stock at $105 per share.
5. Declared a 10% stock dividend on the outstanding common stock when the stock is selling for
$44 per share.
6. Issued the stock dividend.
7. Declared the annual 2017 $10 per share dividend on preferred stock and the $2 per share
dividend on common stock. These dividends are payable in 2018.
(a)
Your answer is partially correct. Try again.
Prepare journal entries to record the transactions described above.
(b)
The parts of this question must be completed in order. This part will be available when you complete the
part above.

Answer 1

Transaction	Account title and explanation	Debit	Credit
1	Cash dividend payable	$ 62,800
	Cash (2,000 ×$10) + (21,400 × $2)		$ 62,800
	(To record the payment of cash dividend on common and preferred stock)
2	Treasury stock	$ 73,800
	Cash (1,800 shares × $41)		$ 73,800
	(To record the purchase of 1,800 treasury stock)
3	Land	$ 33,700
	Paid in capital from treasury stock	$ 900
	Treasury stock (800 shares × $41)		$ 32,800
	(To record the reissuance of 800 treasury stock)
4	Cash (520 shares × $105)	$ 54,600
	Preferred stock (520 shares × $100)		$ 52,000
	paid in capital in excess of par -Preferred stock		$ 2,600
	(To record the issuance of 520 shares of preferred stock in excess of par)
5	Retained earnings (20,400 ×10% × $44)	$ 89,760
	Stock dividend distributable		$ 89,760
	(To record the declaration of 10% stock dividend on common stock) (Outstanding stock = 21,400 - 1,800 + 800 = 20,400 shares)
6	Stock dividend distributable	$ 89,760
	Common stock (20,400 ×10% × $5)		$ 10,200
	Paid in capital in excess of par- Common stock		$ 79,560
	(To record the issuance of stock dividend
7	Retained earnings	$ 70,080
	Cash dividend payable		$ 70,080
	(To record the declaration of cash dividend on common stock and preferred stock)(20,400 +2,040×$2)+ (2,000+520 × $10)