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Tony Corporation began operations on January 1, 2018. The following transactions relating to stockholders’ equity occurred...

Tony Corporation began operations on January 1, 2018. The following transactions relating to stockholders’ equity occurred in the first two years of the company’s operations.

2018

Jan. 1 Authorized the issuance of 2 million shares of $5 par value common stock and 100,000 shares of $100 par value, 10% cumulative, preferred stock.

Jan. 2 Issued 200,000 shares of common stock for $12 cash per share.

Jan. 3 Issued 100,000 shares of common stock in exchange for a building valued at $820,000 and merchandise inventory valued at $380,000.

Jan. 4 Paid $10,000 cash to the company’s founders for organization activities.

Jan. 5 Issued 12,000 shares of preferred stock for $110 cash per share.

2019

June 4 Issued 100,000 shares of common stock for $15 cash per share.

Required:

  1. Prepare journal entries to record these transactions.
  2. Prepare calculation showing dividend allocations and dividends per share for 2018 and 2019 assuming Tony declares the following cash dividends: 2018, $50,000, and 2019, $300,000.

Solutions

Expert Solution

No Entry for Jan 1

a) Journal entries Date General Journal Jan 2 2018 Cash To Common stock To Additional Paid in capital- Common stock Debit $2,400,000 Credit 200000*12 $1,000,000 200000*5 $1,400,000 200000*7 Jan 3 2018 $820,000 $380,000 Building Account Merchandise Account To Common stock To Additional Paid in capital- Common stock $500,000 100000*5 $700,000 $10,000 Jan 4 2018 Organisation expenses To Cash $10,000 $1,320,000 Jan 5 2018 Cash To Preferred stock To Additional Paid in capital- Preferred stock 12000*110 $1,200,000 12000*100 $120,000 12000*10 $1,500,000 Jan 4 2019 Cash To Common stock To Additional Paid in capital-Common stock 100000*15 $500,000 100000*5 $1,000,000 100000*10 b) Dividend allocations and dividends per share 2018 $50,000 $50,000 2019 $300,000 $120,000 Dividend declared Dividend to Preference shares 2018 dividend - (12,000* $10 ) Dividend arrears Preference shares Balance Dividend to common shareholders Preference dividend arrears ($120,000-$50,000) SO $70,000 $180,000 $180,000 $70,000 $4.171 Dividend per preferred stock Dividend per common stock $15.83 $0.45

ekkarill92 answered 1 year ago
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