Question

Akins Corporation manufactures and distributes tires. Selected transactions completed by the company during the current fiscal year are as follows: January 9 - Split the common stock 4 for 1 and reduced the par from $200 to $25 per share. After the split, there were 500,000 common shares outstanding. March 1 – Declared semiannual dividends of $1.50 on 80,000 shares of preferred stock and $0.24 on the 500,000 shares of $25 par common stock to stockholders of record on March 31, payable on April 30. April 30 – Paid the cash dividends. July 9 – Purchased 76,000 shares of the corporation’s own common stock at $27, recording the stock at cost. August 29 - Sold 41,000 shares of treasury stock at $35, receiving cash. September 1 – Declared semiannual dividends of $1.20 on the preferred stock and $0.20 on the common stock (before the stock dividend). In addition, a 1% common stock dividend was declared on the common stock outstanding, to be capitalized at the fair market value of the common stock, which is estimated at $30. October 31 – Paid the cash dividends and issued the certificates

for the common stock dividend.

Answer 1

Prepare journal entries as follows:

Date	Account Titles and Explanation	Debit	Credit
Jan. 09	No entry journalized
Mar. 01	Cash Dividends	$240,000
	Cash Dividend payable		$240,000
	[(80,000 × $1.5) + (500,000 × $0.24)]
	(To record the declartion of cash dividend)
Apr. 30	Cash Dividend payable	$240,000
	Cash		$240,000
	(To record the payment of dividend)
Jul. 09	Treasury Stock	$2,052,000
	Cash [76,000 shares × $27]		$2,052,000
	(To record the purchase of 76,000 shares of Treasury stock)
Aug. 29	Cash [41,000 × $35]	$1,435,000
	Treasury Stock [41,000 × $27]		$1,107,000
	Paid-in-capital from Treasury stock		$328,000
	(To record the sale of treasury stock)
Sept. 01	Cash Dividends	$207,600
	Cash Dividend payable		$207,600
	[(80,000 × $1.2) + (500,000 - 76,000 + 41,000) × $0.24)]
Sept. 01	Stock Dividend [(500,000 shares × 1% × $30)]	$150,000
	Stock Dividend Distributable [(500,000 shares × 1% × $25)]		$125,000
	Paid-in-capital in Excess of par-Common stock		$25,000
Oct. 31	Cash Dividend payable	$207,600
	Cash		$207,600
Oct. 31	Stock Dividend Distributable	$125,000
	Common stock		$125,000