In: Accounting
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. |
.