Question

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

Preferred 2% Stock, $175 par (90,000 shares authorized, 45,000 shares issued)	$7,875,000
Paid-In Capital in Excess of Par—Preferred Stock	1,260,000
Common Stock, $15 par (600,000 shares authorized, 230,000 shares issued)	3,450,000
Paid-In Capital in Excess of Par—Common Stock	450,000
Retained Earnings	27,634,000

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

1. Issued 60,000 shares of common stock at $19, receiving cash.
2. Issued 23,000 shares of preferred 2% stock at $192.
3. Purchased 36,000 shares of treasury common for $19 per share.
4. Sold 18,000 shares of treasury common for $22 per share.
5. Sold 12,000 shares of treasury common for $17 per share.
6. Declared cash dividends of $3.50 per share on preferred stock and $0.04 per share on common stock.
7. Paid the cash dividends.

Required:

Journalize the entries to record the transactions. If an amount box does not require an entry, leave it blank.

a. Issued 60,000 shares of common stock at $19, receiving cash.

b. Issued 23,000 shares of preferred 2% stock at $192.

c. Purchased 36,000 shares of treasury common for $19 per share.

d. Sold 18,000 shares of treasury common for $22 per share.

e. Sold 12,000 shares of treasury common for $17 per share.

f. Declared cash dividends of $3.50 per share on preferred stock and $0.04 per share on common stock.

g. Paid the cash dividends.

Answer 1

Transaction	General Journal	Debit	Credit
a)	Cash	$1,140,000
	Common stock		$900,000
	Paid in capitalin exccess of par		$240,000
	(To record issue of 60,000 common stock)
b)	Cash	$4,416,000
	preferred 2% stock		$4,025,000
	Paid in capital in excess of par		$391,000
	(To record issue of 23,00 preferred 2% stock)
c)	Treasury stock	$684,000
	Cash		$684,000
	(To record purchase of treasury stock)
d)	Cash	$396,000
	Treasury stock		$342,000
	Paid in capital excess of par-Treasury stock		$54,000
	(To record sale of treasury stock)
e)	Cash	$204,000
	Paid in capital in excess of par-Treasury stock	$24,000
	Treasury stock		$228,000
	(To record sale of Treasury stock
f)	Common stock dividend	$113,600
	Preffered stock Dividend	$238,000
	Common stock dividend payable		$113,600
	Preferred stock dividend payable		$238,000
	(To record Dividend payable)
	Retained earnings	$351,600
	Preferred stock dividend		$238,000
	Common stock dividend		$113,600
	(To transfer
g)	Common stock dividend payable	$113,600

	Preferred stock dividend payable	$238,000
	Cash		$351,600

Notes-

a) 60,000 common stock was issued at $19 when par value was $15

Cash received=$19*60,000=$1,140,000

Common stock credited at par value=$15*60,000=$900,000

Amount credit to paid in capital in excess of par=($19-$15)*60,000=$240,000

b) 23,000 preferred 2% stock was issued at $192 when par value was $175

Cash received=$192*23,000=$4,416,000

Common stock credited at par value=$175*23,000=$4,025,000

Amount credit to paid in capital in excess of par=($192-175)*23,000=$391,000

c) 36,000 Treasury stock is purchased at $19

Cash paid=36,000*19=$684,000

d) 18,000 Treasury stock sold for $22

Treasury stock were purchased at $19 per share, so Treasury stock are credited at $19 and excess received of $ 3(22-19) per hsare is credited to paid in capital in excess of par-Treasury stock.

Cash=$22*18,000=$396,000

Treasury stock=19*18,000=$342,000

Paid in capital in excess of par-Treasury stock=($22-$19)*18,000=$54,000

e)

12,000 Treasury stock sold for $27

Treasury stock were purchased at $19 per share, so Treasury stock are credited at $19 and difference of $ 2(19-17) per hsare is debited to paid in capital in excess of par-Treasury stock.

Cash=$17*12,000=$204,000

Treasury stock=19*12,000=$228,000

Paid in capital in excess of par-Treasury stock=($19-$17)*12,000=$24,000

f) Total number of preferred stock outstanding=23,000+45,000=68,000

Total number of common stock outstanding=230,000+60,000-36,000+18,000+12,000=284,000

Common stock dividend paid=$0.04*284,000=$113,600

Preffered stock dividend paid=$3.5*68,000=$238,000