Question

The following selected accounts appear in the ledger of Parks Construction Inc. at the beginning of the current year:

Preferred 2% Stock, $50 par (50,000 shares authorized, 25,000 shares issued)	$1,250,000
Paid-In Capital in Excess of Par—Preferred Stock	250,000
Common Stock, $20 par (700,000 shares authorized, 210,000 shares issued)	4,200,000
Paid-In Capital in Excess of Par—Common Stock	550,000
Retained Earnings	13,250,000

During the year, the corporation completed a number of transactions affecting the stockholders' equity. They are summarized as follows:

Issued 70,000 shares of common stock at $25, receiving cash.

Issued 13,000 shares of preferred 2% stock at $69.

Purchased 42,000 shares of treasury common for $25 per share.

Sold 21,000 shares of treasury common for $28 per share.

Sold 14,000 shares of treasury common for $23 per share.

Declared cash dividends of $1.00 per share on preferred stock and $0.06 per share on common stock.

Paid the cash dividends.

Journalize the entries to record the transactions.

For a compound transaction, if an amount box does not require an entry, leave it blank.

Required:

a. Issued 70,000 shares of common stock at $25, receiving cash.

b. Issued 13,000 shares of preferred 2% stock at $69.

c. Purchased 42,000 shares of treasury common for $25 per share.

d. Sold 21,000 shares of treasury common for $28 per share.

e. Sold 14,000 shares of treasury common for $23 per share.

f. Declared cash dividends of $1.00 per share on preferred stock and $0.06 per share on common stock.

g. Paid the cash dividends.

Answer 1

• All working forms part of the answer

Working #1: Cash Dividend
	Preferred Stock	Common Stock
No. of shares in the beginning	50,000	700,000
issued during year	13,000	70,000
Shares re acquired as Treasury Stock		(42,000)
treasury Shares re issued		35,000
Total shares outstanding at the time of dividend declared	63,000	763,000
Dividend per share	$                                                            1.00	$                                0.06
Total Dividend	$                                                 63,000.00	$                     45,780.00

• All journal Entries

Journal Entry no.	Account titles	Debit	Credit	Working
a.	Cash	$                      1,750,000.00		[70,000 shares x $ 25]
	Common Stock		$         1,400,000.00	[70,000 shares x $ 20 par]
	Paid in Capital in Exces of Par - Common Stock		$             350,000.00	[70,000 shares x $ 5]
	(common stock issued)
b.	Cash	$                           897,000.00		[13,000 shares x $ 69]
	Preferred Stock		$             650,000.00	[13,000 shares x $ 50 par]
	Paid in Capital in Exces of Par - Preferred Stock		$             247,000.00	[13,000 shares x $ 19]
	(Preferred stock issued)
c.	Treasury Stock	$                       1,050,000.00		[42,000 shares x $25]
	Cash		$         1,050,000.00
	(stock re acquired)
d.	Cash	$                           588,000.00		[21,000 shares x $28]
	Treasury Stock		$            525,000.00	[21,000 shares x $25 cost]
	Paid in Capital - Treasury Stock		$               63,000.00	[21,000 shares x $ 3]
	(Stock re-issued)
e.	Cash	$                           322,000.00		[14,000 shares x $23]
	Paid in Capital - Treasury Stock	$                             28,000.00		[14,000 shares x $2]
	Treasury Stock		$             350,000.00	[14,000 shares x $25]
f.	Dividend	$                           108,780.00		[See Working #1: 63000 + 45780]
	Dividend payable		$             108,780.00
	(dividend declared)
g.	Dividend payable	$                           108,780.00
	Cash		$             108,780.00
	(dividend paid in cash)