Question

Larkspur Corporation showed the following information on its financial statements on December 31, 2021:

Preferred Shares, no par value $6 cumulative, 340,000 shares authorized,       140,000 shares issued and outstanding		$19,600,000
Common Shares, no par value, unlimited shares authorized,       500,000 shares issued and outstanding		$13,500,000

The following transactions occurred, in the order given, during 2022:

(a)		April 15: Received subscriptions and down payments for 136,000 common shares at $32 per share. The subscription contracts call for 65% of the subscription price to be paid upon receipt, and the remaining 35% to be paid on June 30. In the event of default on the subscriptions, the company will retain the down payment.
(b)		May 1: Issued 60,000 preferred shares at $165 per share.
(c)		June 30: Received payment for 107,000 of the subscribed common shares; the remaining 29,000 defaulted. Issued the share certificates for the appropriate number of shares.
(d)		August 5: Repurchased and cancelled 15,000 common shares at a cost of $19 per share.
(e)		September 15: Declared dividends for preferred shares (dividends had not been paid the previous year). Also declared $1.90 per share dividend for common shares. Both dividends are to be paid on November 1 to shareholders of record on October 1.
(f)		If the preferred shares had a $140 par value, what would be the journal entry for the May 1 issuance of preferred shares in part (b)?

Prepare the journal entries to record the above transactions for Larkspur Corporation for 2022. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round average share price to 2

Answer 1

Date	Particulars	Debit	Credit
04/15/2022	Cash	$ 2,828,800
	Subscription receivable	$ 1,523,200
	Common stock-subscribed		$ 4,352,000
	[Note matured and interest amount paid]
05-01-22	Cash	$ 9,900,000
	Preferred shares		$ 9,900,000
	[Preferred shares issued ]
06/30/22	Cash	$ 1,198,400
	Common stock-subscribed	$ 4,352,000
	Common stock		$ 3,424,000
	Forefeited subscription		$    603,200
	Subscription receivable		$ 1,523,200
	[107000 common shares issued and outstanding and oroceeds on remaining 29000 shares forefeited]
08-05-22	Common stock	$    405,000
	Gain on retirement of stock		$    120,000
	Cash		$    285,000
	[15000 outstanding shares now retired and cancelled]
09-15-22	Retained earnings	$ 2,324,800
	Dividend payable - preferred shares		$ 1,200,000
	Dividend payable - common shares		$ 1,124,800
	[Dividend declared and provided for]
11-01-22	Dividend payable - preferred shares	$ 1,200,000
	Dividend payable - common shares	$ 1,124,800
	Cash		$ 2,324,800
	[Dividend paid]
	If par value for preferred stock was $140 entry would have been
05-01-22	Cash	$ 9,900,000
	Preferred shares		$ 8,400,000
	APIC - Preferred stock		$ 1,500,000
	[Preferred shares issued ]

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