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Stockholders’ Equity Transactions, Journal Entries, and T-Accounts The stockholders’ equity of Fremantle Corporation at January 1...

Stockholders’ Equity Transactions, Journal Entries, and T-Accounts

The stockholders’ equity of Fremantle Corporation at January 1 follows:

8 Percent preferred stock, $100 par value, 20,000 shares
authorized; 4,000 shares issued and outstanding $400,000
Common stock, $1 par value, 10,000 shares
authorized; 40,000 shares issued and outstanding 40,000
Paid-in capital in excess of par value-Preferred stock 200,000
Paid-in capital in excess of par value-Common stock 800,000
Retained earnings 560,000
Total Stockholders' Equity $2,000,000

The following transactions, among others, occurred during the year:

Jan. 1 Announced a 2-for-1 common stock split, reducing the par value of the common stock to $0.50 per share.
Mar. 31 Converted $90,000 face value of convertible bonds payable (the book value of the bonds was $94,000) to common stock. Each $1,000 bond converted to 125 shares of common stock.
June 1 Acquired equipment with a fair market value of $46,000 in exchange for 300 shares of preferred stock.
Sept. 1 Acquired 11,000 shares of common stock for cash at $21 per share.
Nov. 21 Issued 5,000 shares of common stock at $23 cash per share.
Dec. 28 Sold 1,000 treasury shares at $25 per share.
Dec. 31 Closed net income of $103,000, to the Retained Earnings account.

Required

a. Set up T-accounts for the stockholders’ equity accounts as of the beginning of the year and enter the January 1 balances.

HINT: Complete part b. below prior to entering any additional T-account data.

Cash
Sep.01 Answer Answer
Nov.21 Answer Answer
Dec.28 Answer Answer
Bonds Payable
Mar.31 Answer Answer
Premium on Bonds Payable
Mar.31 Answer Answer
Equipment
Jun.01 Answer Answer
Preferred Stock
Beg. Answer Answer
Jun.01 Answer Answer
Bal. Answer Answer
Common Stock
Beg. Answer Answer
Mar.31 Answer Answer
Nov.21 Answer Answer
Bal. Answer Answer
Paid-in-Capital in Excess of Par Value - Preferred Stock
Beg. Answer Answer
Jun.01 Answer Answer
Bal. Answer Answer
Paid-in-Capital in Excess of Par Value - Common Stock
Beg. Answer Answer
Mar.31 Answer Answer
Nov.21 Answer Answer
Bal. Answer Answer
Paid-in-Capital from Treasury Stock
Dec.28 Answer Answer
Bal. Answer Answer
Treasury Stock - Common
Sept.01 Answer Answer
Dec.28 Answer Answer
Bal. Answer Answer
Retained Earnings
Bal. Answer Answer
Dec.31 Answer Answer
Bal. Answer Answer

b. Prepare journal entries for the given transactions and post them to the T-accounts above in part a. Do not prepare the journal entry for the Dec. 31 transaction, but post the appropriate amount to the Retained Earnings T-account. Determine the ending balances for the stockholders’ equity accounts.

General Journal
Date Description Debit Credit
Jan.01 (Memorandum) Common Stock split 2 for 1.
Mar.31 Answer
Answer Answer
Premium on Bonds Payable Answer Answer
Common Stock Answer Answer
Answer
Answer Answer
To record conversion of bonds.
Jun.01 Answer
Answer Answer
Answer
Answer Answer
Paid-in-Capital in Excess of Par Value - Preferred Stock Answer Answer
Issued preferred stock in exchange for equipment.
Sept.01 Answer
Answer Answer
Answer
Answer Answer
Purchased treasury stock.
Nov.21 Answer
Answer Answer
Common Stock Answer Answer
Answer
Answer Answer
Issued common stock.
Dec.28 Answer
Answer Answer
Paid-in-Capital from Treasury Stock Answer Answer
Answer
Answer Answer
To record sale of treasury stock.

.

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