Question

Diamondback Welding & Fabrication Corporation sells and services pipe welding equipment in Illinois. The following selected accounts appear in the ledger of Diamondback Welding & Fabrication Corporation at the beginning of the current fiscal year:

Preferred 2% Stock, $80 par (100,000 shares authorized, 60,000 shares issued)	$4,800,000
Paid-In Capital in Excess of Par—Preferred Stock	210,000
Common Stock, $9 par (3,000,000 shares authorized, 1,750,000 shares issued)	15,750,000
Paid-In Capital in Excess of Par—Common Stock	1,400,000
Retained Earnings	52,840,000

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

Feb.	2	Purchased 87,500 shares of treasury common for $8 per share.
Mar.	16	Sold 55,000 shares of treasury common for $11 per share.
May	7	Issued 20,000 shares of preferred 2% stock at $84.
Jun.	27	Issued 400,000 shares of common stock at $13, receiving cash.
Aug.	30	Sold 18,000 shares of treasury common for $7.50 per share.
Dec.	5	Declared cash dividends of $1.60 per share on preferred stock and $0.05 per share on common stock.
	31	Paid the cash dividends.

Journalize the entries to record the transactions. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS
Diamondback Welding & Fabrication Corporation
General Ledger
ASSETS 110 Cash 120 Accounts Receivable 131 Notes Receivable 132 Interest Receivable 141 Merchandise Inventory 145 Office Supplies 151 Prepaid Insurance 181 Land 193 Equipment 194 Accumulated Depreciation-Equipment LIABILITIES 210 Accounts Payable 221 Notes Payable 226 Interest Payable 231 Cash Dividends Payable 236 Stock Dividends Distributable 241 Salaries Payable 261 Mortgage Note Payable EQUITY 311 Common Stock 312 Paid-In Capital in Excess of Par-Common Stock 315 Treasury Stock 321 Preferred Stock 322 Paid-In Capital in Excess of Par-Preferred Stock 331 Paid-In Capital from Sale of Treasury Stock 340 Retained Earnings 351 Cash Dividends 352 Stock Dividends 390 Income Summary	REVENUE 410 Sales 610 Interest Revenue

Journalize the entries to record the transactions. Refer to the Chart of Accounts for exact wording of account titles.

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JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
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Answer 1

Event	Description	Debit $	credit $
1	Treasury stock (87500*8)	700,000
	cash		700,000
	(to record the entry for stock repurchased )
2	Cash   (55000*11)	605000
	Paid-In Capital in Excess of Par-Treasury stock [11-8]*55000		165000
	Treasury stock   (55000 * 8)		440000
	(to record the sale of treasury stock)
3	cash   (20,000* 84)	1680000
	Preferred stock   (20,000*80)		1600000
	Paid-In Capital in Excess of Par -Preferred stock [20000*(84-80)]		80000
	(to record the sale of preferred stock)
4	cash (400000*13)	5200000
	Common stock   (400000*9)		3600000
	Paid-In Capital in Excess of Par -Common stock (400000*(13-9)0		1600000
	(to record the sale of Common stock)
5	cash   (18000*7.5)	135000
	Additional paid in capital -Treasury stock (18000*.5)	9000
	Treasury stock    (18000*8)		144000
	(to record the sale of tresury stock)
6	Retained dividend	234775
	Cash dividend payable		234775
	(To record the entry for dividend payable)
	Calculation of dividend
	Preferred dividend (80,000)*$1.60 =128000		128000
	common stock dividend [2135500*.05] =106775		106775
7	Cash dividend payable	234775
	cash		234775
	[being dividend paid]

Calculation of the common shares outstanding

= 1750000-87500+55000+400000+18000

=2135500