Question

Entries for Selected Corporate Transactions

Selected transactions completed by Primo Discount Corporation during the current fiscal year are as follows.

Instructions:

Journalize the transactions. If no entry is required, select "No entry required" from the dropdown box and leave the amount boxes blank. For a compound transaction, if an amount box does not require an entry, leave it blank.

Jan. 15. Split the common stock 5 for 1 and reduced the par from $175 to $35 per share. After the split, there were 575,000 common shares outstanding.

Date	Account	Debit	Credit
Jan. 9.

Feb. 28. Purchased 46,000 shares of the corporation's own common stock at $38, recording the stock at cost.

Date	Account	Debit	Credit
Feb. 28.

May 1. Declared semiannual dividends of $2.60 on 45,000 shares of preferred stock and $0.12 on the common stock to stockholders of record on June 1, payable on July 10.

Date	Account	Debit	Credit
May 1.

July 10. Paid the cash dividends.

Date	Account	Debit	Credit
July 10.

Sept. 7. Sold 33,000 shares of treasury stock at $42, receiving cash.

Date	Account	Debit	Credit
Sept. 7.

Oct. 1. Declared semiannual dividends of $2.60 on the preferred stock and $0.18 on the common stock (before the stock dividend).

Date	Account	Debit	Credit
Oct. 1.

Oct. 1. A 2% common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at $44.

Date	Account	Debit	Credit
Oct. 1.

Dec. 1. Paid the cash dividends.

Date	Account	Debit	Credit
Dec. 1.

Dec. 1. Issued the certificates for the common stock dividend.

Date	Account	Debit	Credit
Dec. 1.

Answer 1

Solution

Primo Discount Corporation

Journal Entries:

Date	Account Titles	Ref. No.	Debit	Credit
9-Jan	No Entry
28-Feb	Treasury Stock		$1,748,000
	Cash			$1,748,000
	(To record purchase of 46,000 own shares at $38 per share)
1-May	Preferred Dividend		$117,000
	Common Dividend		$63,480
	Dividend Payable			$180,480
	(to record preferred dividend declared - $2.60 x 45,000 = 117,000; common dividend - $0.12 x (575,000 - 46,000) = 63,480)
10-Jul	Dividend Payable		$180,480
	Cash			$180,480
	(To record payment of dividend)
7-Sep	Cash		$1,386,000
	Paid-in Capital Treasury Stock			$132,000
	Treasury Stock			$1,254,000
	(To record sale of 38,000 shares of treasury stock at cost - 1,254,000, paid in capital - 33,000 x ($42 - $38) = 132,000)
1-Oct	Preferred Dividend		$117,000
	Dividend - Common Stock		$20,700
	Dividend Payable			$137,700
	(To record dividend declared on preferred stock and common stock (before stock dividend), number of shares outstanding = 575,000/5 = 115,000;)
1-Oct	Retained Earnings		$494,560
	Stock Dividend Distributable			$494,560
	(To record 2% stock dividend declared - 2% x $44 x (575,000 - 46,000 + 33,000) = $494,560
1-Dec	Dividends Payable		$137,700
	Cash			$137,700
	(To record payment of dividend)
1-Dec	Stock Dividend Distributable		$494,560
	Common Stock			$393,400
	Paid-in Capital Common Stock			$101,160
	(To record issue of certificates for common stock dividend)

Notes:

1. Treasury stock –

On Feb 28, Own shares of 46,000 purchased at $38 = $1,748,000

1. Dividend declared on preferred stock = $2.60 x 45,000 = $117,000

Dividend declared on common stock = (575,000 – 46,000) x $0.12 = $63,480

Total dividends payable = 117,000 + 63,480 = $180,480

1. Sale of 33,000 treasury stock –

Cost of treasury stock – 33,000 x 38 = $1,254,000

Cash from sale = $1,386,000

Paid-up capital = $132,000($42 - $32 = $4 per share)

1. Dividends declared on Oct:

Common stock -Assumed to be before the stock dividend:

$0.18 x 575,000 = $103,500

Preferred stock – 45,000x $2.60 = 117,000

1. Stock dividend declared –

2% x (575,000 – 46,000 + 33,000 x $44 = $494,560

1. Certificates for common stock –

Retained earnings = $494,560

Common stock – 494,560/44 x $35 = $393,400

Paid in capital = 494,560/35 (44 -35) = $101,160