Question

For each event record the Journal entry relating to the event and display                              
the equity section after the event                                              
Event:                                                          
1   authorized 2.1 millions of common stock $25 par value                                  
2   sell 820,000 share for net proceeds of $40 per share                                  
3   issue for legal services rendered to set up company 4000 shares, market @ issue = $45/share                  
4   issue 100,000 of preferred stock $5 par for $50, $4/share cumulative dividend                      
5   record first year net income $2400,000                                      
6   No dividends that first year                                              
7   no dividends the next year [ 2 years without dividends ]                                  
8   record net income for third year of $1500,000 [-0- net income yr. 2]                          
9   Declare & pay preferred & common dividends of $1800,000 [can shop as one or two JE's]                  
note: show how much per share dividends for common & preferred paid                      
10   Buy back 125,000 common shares @ $35/share                                  
11   buy back 50,000 common shares @ $65/share                                      
12   buy land with market value of $8000,000 for 110,000 shares from treasury [use average price per share] with a share market value of $70

please type

Answer 1

A	B	C	D	E	F	G	H	I
2
3		1)
4
5		Aurthorized Common Stocks	2.1	millions
6		Par Value	$25
7
8		As there is no transaction, no journal entry is required.
9
10		2)
11
12		Number of shares Issued	820000
13		Net Proceed Per Share	$40
14
15		Journal entry for issue of share will be:
16
17		Account	Debit	Credit
18		Cash (820,000*$40)	$32,800,000
19		Common Stock (820,000*$25)		$20,500,000
20		Additional Paid in Capital-Common Stock		$12,300,000
21
22		3)
23
24		Number of shares Issued	4000
25		Market price per Share	$45
26
27		Journal entry for issue of share will be:
28
29		Account	Debit	Credit
30		Legal Expense (4,000*$45)	$180,000
31		Common Stock (4,000*$25)		$100,000
32		Additional Paid in Capital-Common Stock		$80,000
33
34		4)
35
36		Number of preferred shares Issued	100,000
37		Par Value per preferred share	$5
38		Market price per Share	$50
39		Journal entry for issue of share will be:
40
41		Account	Debit	Credit
42		Cash (100,000*$50)	$5,000,000
43		Preferred Stock (100,000*$5)		$500,000
44		Additional Paid in Capital-Preferred Stock		$4,500,000
45
46		5)
47		Net income will increase the retained earnings.
48
49		Account	Debit	Credit
50		Income Summary	$2,400,000
51		Retained Earnings		$2,400,000
52
53		6)
54
55		Since no dividends paid there will not be any journal entry.
56
57		7)
58
59		Since no dividends paid there will not be any journal entry.
60
61		8)
62
63		Income In Year 2	0
64
65		Journal entry to record income in Year 3
66		Account	Debit	Credit
67		Income Summary	$1,500,000
68		Retained Earnings		$1,500,000
69
70		9)
71
72		Since preferred shares are cumulative, therefore all the dividends not paid during last two years will be paid first.
73		Dividend per preferred Share	$4
74		Number of preferred share issued	100000
75		Dividend for preferred share in year1	$400,000.00
76		Dividend for preferred share in year2	$400,000.00
77		Total Preferred Dividends Due	$800,000.00
78		Preferred Deividends for Year 3	$400,000
79		Total Preferred Dividends	$1,200,000.00
80
81		Preferred Dividends per share	$12.00	=D79/D74
82
83
84		Common Dividends	$1,800,000
85		Number of Common shares outstanding	824000
86
87		Common Dividends per share	$2.18	=D84/D85
88
89		Journal entry for declaration of common and preferred dividends:
90		Account	Debit	Credit
91		Retained Earnings	$3,000,000
92		Dividends Payable		$3,000,000
93
94		Journal entry for payment of dividends:
95		Account	Debit	Credit
96		Dividends Payable	$3,000,000
97		Cash		$3,000,000
98
99		10)
100
101		Number of shares bought	125000
102		Market Price	$35
103
104		Journal entry will be as follows:
105		Accounts	Debit	Cash
106		Treasury Stock	$4,375,000
107		Cash		$4,375,000
108
109		11)
110
111		Number of shares bought	50000
112		Market Price	$65
113
114		Journal entry will be as follows:
115		Accounts	Debit	Cash
116		Treasury Stock	$3,250,000
117		Cash		$3,250,000
118
119		12)
120		Total Treasury Stock	$7,625,000
121		Total number of Tresury Stock	175000
122		Average Cost per Treasury Stock	$43.57
123
124		Number of treasury stock issued for land	110,000
125		Market Price Per share	$70
126
127		Journal entry will be as follows:
128		Accounts	Debit	Cash
129		Land	$8,000,000
130		Treasury Stock		$4,792,857
131		Additional Paid in Capital -Treasury Stock		$2,907,143
132		Cash		$300,000
133

Formula sheet

A	B	C	D	E	F	G	H	I
2
3		1)
4
5		Aurthorized Common Stocks	2.1	millions
6		Par Value	25
7
8		As there is no transaction, no journal entry is required.
9
10		2)
11
12		Number of shares Issued	820000
13		Net Proceed Per Share	40
14
15		Journal entry for issue of share will be:
16
17		Account	Debit	Credit
18		Cash (820,000*$40)	=D12*D13
19		Common Stock (820,000*$25)		=D12*D6
20		Additional Paid in Capital-Common Stock		=D18-E19
21
22		3)
23
24		Number of shares Issued	4000
25		Market price per Share	45
26
27		Journal entry for issue of share will be:
28
29		Account	Debit	Credit
30		Legal Expense (4,000*$45)	=D24*D25
31		Common Stock (4,000*$25)		=D24*D6
32		Additional Paid in Capital-Common Stock		=D30-E31
33
34		4)
35
36		Number of preferred shares Issued	100000
37		Par Value per preferred share	5
38		Market price per Share	50
39		Journal entry for issue of share will be:
40
41		Account	Debit	Credit
42		Cash (100,000*$50)	=D36*D38
43		Preferred Stock (100,000*$5)		=D36*D37
44		Additional Paid in Capital-Preferred Stock		=D42-E43
45
46		5)
47		Net income will increase the retained earnings.
48
49		Account	Debit	Credit
50		Income Summary	=E51
51		Retained Earnings		2400000
52
53		6)
54
55		Since no dividends paid there will not be any journal entry.
56
57		7)
58
59		Since no dividends paid there will not be any journal entry.
60
61		8)
62
63		Income In Year 2	0
64
65		Journal entry to record income in Year 3
66		Account	Debit	Credit
67		Income Summary	=E68
68		Retained Earnings		1500000
69
70		9)
71
72		Since preferred shares are cumulative, therefore all the dividends not paid during last two years will be paid first.
73		Dividend per preferred Share	4
74		Number of preferred share issued	100000
75		Dividend for preferred share in year1	=D73*D74
76		Dividend for preferred share in year2	=D74*D73
77		Total Preferred Dividends Due	=D75+D76
78		Preferred Deividends for Year 3	=D73*D74
79		Total Preferred Dividends	=D77+D78
80
81		Preferred Dividends per share	=D79/D74	=D79/D74
82
83
84		Common Dividends	1800000
85		Number of Common shares outstanding	=D12+D24
86
87		Common Dividends per share	=D84/D85	=D84/D85
88
89		Journal entry for declaration of common and preferred dividends:
90		Account	Debit	Credit
91		Retained Earnings	=E92
92		Dividends Payable		=D79+D84
93
94		Journal entry for payment of dividends:
95		Account	Debit	Credit
96		Dividends Payable	=E92
97		Cash		=D96
98
99		10)
100
101		Number of shares bought	125000
102		Market Price	35
103
104		Journal entry will be as follows:
105		Accounts	Debit	Cash
106		Treasury Stock	=D101*D102
107		Cash		=D106
108
109		11)
110
111		Number of shares bought	50000
112		Market Price	65
113
114		Journal entry will be as follows:
115		Accounts	Debit	Cash
116		Treasury Stock	=D111*D112
117		Cash		=D116
118
119		12)
120		Total Treasury Stock	=D106+D116
121		Total number of Tresury Stock	=D101+D111
122		Average Cost per Treasury Stock	=D120/D121
123
124		Number of treasury stock issued for land	110000
125		Market Price Per share	70
126
127		Journal entry will be as follows:
128		Accounts	Debit	Cash
129		Land	8000000
130		Treasury Stock		=D124*D122
131		Additional Paid in Capital -Treasury Stock		=D124*(D125-D122)
132		Cash		=D129-E130-E131
133