Question

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Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2021, 320 shares of preferred stock and 4,200 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2021:

March		1		Issue 1,300 shares of common stock for $44 per share.
May		15		Purchase 420 shares of treasury stock for $37 per share.
July		10		Resell 220 shares of treasury stock purchased on May 15 for $42 per share.
October		15		Issue 220 shares of preferred stock for $47 per share.
December		1		Declare a cash dividend on both common and preferred stock of $0.70 per share to all stockholders of record on December 15. (Hint: Dividends are not paid on treasury stock.)
December		31		Pay the cash dividends declared on December 1.

Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2021: Preferred Stock, $320; Common Stock, $42; Additional Paid-in Capital, $77,000; and Retained Earnings, $30,900. Net income for the year ended December 31, 2021, is $11,200.

Required:

Record the entry on December 15.

Answer 1

Journal Entry-Donnie Hilfiger
Date	Account Tittle	Debit	Credit
01-Mar	Cash (1300 x $44)	$57,200.00
	Common stock (1300 x $0.01)		$13.00
	Additional paid-in capital -common		$57,187.00
	(To record issue of common stock)
15-May	Treasury stock (420 x $37)	$15,540.00
	Cash		$15,540.00
	(To record purchase of treasury stock)
10-Jul	Cash (220 x $42)	$9,240.00
	Treasury stock (220 x $37)		$8,140.00
	Additional paid-in capital -treasury stock		$1,100.00
	(To record re-issue of treasury stock)
15-Oct	Cash (220 x $47)	$10,340.00
	Preferred stock (220 x $1)		$220.00
	Additional paid-in capital -preferred		$10,120.00
	(To record issue of preferred stock)
1-Dec	Dividend (320+4200+1300-420+220+220)*0.70	$4,088.00
	Dividend payable		$4,088.00
	To Record Dividend Declearation
31-Dec	Dividend payable	$4,088.00
	Cash		$4,088.00
	(To record payment of dividends)