Question

Selected transactions completed by Primo Discount Corporation during the current fiscal year are as follows:

Jan.	9	Split the common stock 3 for 1 and reduced the par from $75 to $25 per share. After the split, there were 1,170,000 common shares outstanding.
Feb.	28	Purchased 39,000 shares of the corporation’s own common stock at $28, recording the stock at cost.
May	1	Declared semiannual dividends of $0.85 on 72,300 shares of preferred stock and $0.10 on the common stock to stockholders of record on June 1, payable on July 10.
Jul.	10	Paid the cash dividends.
Sep.	7	Sold 29,300 shares of treasury stock at $35, receiving cash.
Oct.	1	Declared semiannual dividends of $0.85 on the preferred stock and $0.10 on the common stock (before the stock dividend). In addition, a 4% common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at $37.
Dec.	1	Paid the cash dividends and issued the certificates for the common stock dividend.

Journalize the transactions. If no entry is required, simply skip to the next transaction. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Journal Entries are shown as follows:-

Journal Entries (Amount in $)

Date	Account Titles	Debit	Credit
Feb.28	Treasury Stock (39,000*$28)	1,092,000
	Cash		1,092,000
May 1	Cash dividends {(0.85*72,300)+[(1,170,000-39,000)*0.10]}	174,555
	Cash dividends payable		174,555
July 10	Cash dividends payable	174,555
	Cash		174,555
Sept. 7	Cash (29,300*$35)	1,025,500
	Treasury Stock (29,300*$28)		820,400
	Paid in Capital from sale of Treasury Stock ($1,025,500 - $820,400) (Bal. fig)		205,100
Oct. 1	Cash Dividends {(0.85*72,300)+[(1,170,000-9,700)*0.10]}	177,485
	Cash Dividends payable		177,485
Oct. 1	Stock Dividends [(1,170,000-9,700)*4%*$37]	1,717,244
	Stock Dividends Distributable [(1,170,000-9,700)*4%*$25]		1,160,300
	Paid-in capital in excess of Par - Common Stock [(1,170,000-9,700)*4%*$12]		556,944
Dec. 1	Cash Dividends payable	177,485
	Cash		177,485
Dec. 1	Stock Dividends Distributable	1,160,300
	Common Stock		1,160,300

Working Notes:-

1) No journal entry required on January 1

2) After sale of treasury stock, treasury stock left = 39,000 shares - 29,300 shares = 9,700 shares

3) On October 1, cash dividends on common stock will be payable for $0.10 on 1,160,300 shares (1,170,000 shares outstanding - 9,700 treasury stock).