Question

Major League Apparel has two classes of stock authorized: 6%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during 2018, its first year of operations:

January 2 Issue 110,000 shares of common stock for $70 per share.
February 14 Issue 60,000 shares of preferred stock for $12 per share.
May 8 Repurchase 11,000 shares of its own common stock for $60 per share.
May 31 Reissue 5,500 shares of treasury stock for $65 per share.
December 1 Declare a cash dividend on its common stock of $0.25 per share and a $36,000 (6% of par value) cash dividend on its preferred stock payable to all stockholders of record on December 15. The dividend is payable on December 30. (Hint: Dividends are not paid on treasury stock.)
December 30 Pay the cash dividends declared on December 1.

Record the transaction

Answer 1

Solution:

Journal Entries - League Apparel
Date	Particular	Debit	Credit
2-Jan	Cash A/c Dr	$7,700,000.00
	To Common Stock A/c		$110,000.00
	To Paid in capital in excess of Par - Common Stock		$7,590,000.00
	(Being 110000 share issued of $1 par value for 70 per share)
14-Feb	Cash A/c Dr	$720,000.00
	To 6% Preferred Stock		$600,000.00
	To Paid in capital in excess of Par - Preferred Stock		$120,000.00
	(Being 60000 preference share issued of $10 par value for $12 per share)
8-May	Treasury Stock A/c Dr	$660,000.00
	To Cash A/c		$660,000.00
	(Being 11000 shares repurchased at $60 per share)
31-May	Cash A/c Dr (5500*65)	$357,500.00
	To Treasury Stock (5500*$60)		$330,000.00
	To Additional Paid in Capital (5500*$5)		$27,500.00
	(Being 5500 shares of treasury stock sold at $65 per share)
1-Dec	Retained Earnings A/c Dr	$62,125.00
	To Dividend Payable - Preferred Stock (600000*6%)		$36,000.00
	To Dividend Payable - Common Stock (110000 -11000 + 5500)*0.25]		$26,125.00
	(Being dividend declared on common stock and preferred stock)
31-Dec	Dividend Payable - Preferred Stock Dr	$36,000.00
	Dividend Payable - Common Stock Dr	$26,125.00
	To Cash A/c		$62,125.00
	(Being dividend paid to shareholders)