Question

The following selected accounts appear in the ledger of Parks Construction Inc. at the beginning of the current fiscal year:

Preferred 2% Stock, $75 par (100,000 shares authorized, 80,000 shares issued) $6,000,000

Paid-In Capital in Excess of Par—Preferred Stock 420,000

Common Stock, $8 par (5,000,000 shares authorized, 3,000,000 shares issued) 24,000,000

Paid-In Capital in Excess of Par—Common Stock 1,850,000

Retained Earnings 115,400,000

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

Jan. 5 Issued 400,000 shares of common stock at $11, receiving cash.

Feb. 10 Issued 5,000 shares of preferred 2% stock at $90.

Mar. 19 Purchased 150,000 shares of treasury stock for $10 per share.

May 16 Sold 80,000 shares of treasury stock for $13 per share.

Aug. 25 Sold 20,000 shares of treasury stock for $9 per share.

Dec. 6 Declared cash dividends of $1.50 per share on preferred stock and $0.06 per share on common stock.

31 Paid the cash dividends. Journalize the entries to record the transactions.

Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Solution:

Journal Entries - Parks Construction INC.
Date	Particular	Debit	Credit
5-Jan	Bank A/c Dr	$4,400,000.00
	To Common Stock A/c		$3,200,000.00
	To Paid in capital in excess of Par - Common Stock		$1,200,000.00
	(Being 400000 share issued of $8 par value for $11 per share)
5-Feb	Bank A/c Dr	$450,000.00
	To 2% Preferred Stock		$375,000.00
	To Paid in capital in excess of Par - Preferred Stock		$75,000.00
	(Being 5000 preference share issued of $75 par value for $90 per share)
19-Mar	Treasury Stock A/c Dr	$1,500,000.00
	To Bank A/c		$1,500,000.00
	(Being 150000 shares repurchased at $10 per share)
16-May	Bank A/c Dr (80000*13)	$1,040,000.00
	To Treasury Stock		$800,000.00
	To Additional Paid in Capital		$240,000.00
	(Being 80000 shares of treasury stock sold at $13 per share)
25-Aug	Bank A/c Dr (20000*9)	$180,000.00
	Additional Paid in Capital A/c Dr	$20,000.00
	To Treasury Stock		$200,000.00
	(Being 20000 shares of treasury stock sold at $9 per share)
6-Dec	Retained Earnings A/c Dr	$328,500.00
	To Dividend Payable - Preferred Stock (85000*1.50)		$127,500.00
	To Dividend Payable - Common Stock [(300000+400000-150000+80000+20000)*0.06]		$201,000.00
31-Dec	Dividend Payable - Preferred Stock Dr	$127,500.00
	Dividend Payable - Common Stock Dr	$201,000.00
	To Bank A/c		$328,500.00