Question

Selected Stock Transactions

Diamondback Welding & Fabrication Corporation sells and services pipe welding equipment in Illinois. The following selected accounts appear in the ledger of Diamondback Welding & Fabrication at the beginning of the current year:

Preferred 2% Stock, $80 par (100,000 shares authorized, 60,000 shares issued)	$4,800,000
Paid-In Capital in Excess of Par—Preferred Stock	210,000
Common Stock, $9 par (3,000,000 shares authorized, 1,750,000 shares issued)	15,750,000
Paid-In Capital in Excess of Par—Common Stock	1,400,000
Retained Earnings	52,840,000

During the year, the corporation completed a number of transactions affecting the stockholders' equity. They are summarized as follows:

1. Purchased 87,500 shares of treasury common for $8 per share.
2. Sold 55,000 shares of treasury common for $11 per share.
3. Issued 20,000 shares of preferred 2% stock at $84.
4. Issued 400,000 shares of common stock at $13, receiving cash.
5. Sold 18,000 shares of treasury common for $7.50 per share.
6. Declared cash dividends of $1.60 per share on preferred stock and $0.05 per share on common stock.
7. Paid the cash dividends.

Required:

Journalize the entries to record the transactions.

If an amount box does not require an entry, leave it blank.

a.
b.
c.
d.
e.
f.
g.

Answer 1

Solution:
	Journal Entries
	Sr. No.	Transaction	Account Title and explanation	Debit	Credit
	1	A	Treasurry stock (87,500 Shares X $ 8)	$                  700,000
			Cash		$                   700,000
			(To Record the purchase of treasurry Stock)
	2	B	Cash (55,000 Shares X $ 11)	$                  605,000
			Treasurry Stock (55,000 Shares X $ 8)		$                   440,000
			Addittional Paid in Capital - Treasurry Stock		$                   165,000
			(To record the sale of Treasury stock)
	3	C	Cash (20,000 Shares X $ 84)	$              1,680,000
			Preferred Stock (20,000 Shares X $ 80)		$                1,600,000
			Addittional Paid in Capital - Preferred Stock		$                      80,000
			(To Record the issue of Preferred Stock)
	4	D	Cash (400,000 Shares X $ 13)	$              5,200,000
			Common Stock (400,000 Shares X $ 9)		$                3,600,000
			Addittional Paid in Capital - Common Stock		$                1,600,000
			(To Record the issue of Common Stock)
	5	E	Cash (18,000 Shares X $ 7.50)	$                  135,000
			Addittional Paid in Capital - Treasurry Stock	$                       9,000
			Treasurry Stock (18,000 Shares X $ 8)		$                   144,000
			(To record the sale of Treasury stock)
	6	F	Retained Earnings	$                  234,775
			Dividend Payable - Common Stock		$                   106,775
			Dividend Payable - Preferred Stock		$                   128,000
			(To declared the dividend)
	7	G	Dividend Payable - Common Stock	$                  106,775
			Dividend Payable - Preferred Stock	$                  128,000
			Cash		$                   234,775
			(To Record the paymento of Dividend)
		Notes:
			Calculation of Dividend Payable of PREferred and common Shares
			Issued Shares	1,750,000
			Add: Issued during the year	400,000
			Less: Treasury Stock(87,500 - 55,000 - 18,000)	14,500
			Shares Outstanding	2,135,500
			Dividend Per Shares	$                         0.05
			Dividend Amount	$                  106,775
			Preferred Shares Outstanding (60,000 + 20,000)	80,000
			Dividend Per Shares	$                         1.60
			Dividend Amount	$                  128,000