Question

chAp 13-03


instruction

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

Preferred 1% Stock, $50 par (100,000 shares authorized, 83,900 shares issued)	$4,195,000
Paid-In Capital in Excess of Par—Preferred Stock	184,580
Common Stock, $3 par (5,000,000 shares authorized, 2,120,000 shares issued)	6,360,000
Paid-In Capital in Excess of Par—Common Stock	1,590,000
Retained Earnings	31,692,000

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

Jan.	5	Issued 467,700 shares of common stock at $9, receiving cash.
Feb.	10	Issued 10,700 shares of preferred 1% stock at $62.
Mar.	19	Purchased 53,000 shares of treasury common for $6 per share.
May	16	Sold 20,000 shares of treasury common for $8 per share.
Aug.	25	Sold 5,200 shares of treasury common for $5 per share.
Dec.	6	Declared cash dividends of $0.50 per share on preferred stock and $0.10 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
Parks Construction Inc.
General Ledger
ASSETS 110 Cash 120 Accounts Receivable 131 Notes Receivable 132 Interest Receivable 141 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 EXPENSES 510 Cost of Goods Sold 515 Credit Card Expense 520 Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Selling Expenses 534 Rent Expense 535 Insurance Expense 536 Office Supplies Expense 537 Organizational Expenses 562 Depreciation Expense-Equipment 590 Miscellaneous Expense 710 Interest Expense

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

PAGE 10

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18

Answer 1

Journal Entries (Amounts in $)

	Date	Description	Post Ref.	Debit	Credit
1	Jan 5	Cash (467,700*$9)		4,209,300
2		Common Stock (467,700*$3 par)			1,403,100
3		Paid-In Capital in Excess of Par-Common Stock [467,700*($9-$3)]			2,806,200
4	Feb. 10	Cash (10,700*$62 per share)		663,400
5		Preferred Stock (10,700*$50 par)			535,000
6		Paid-In Capital in Excess of Par-Preferred Stock [10,700*($62-$50)]			128,400
7	Mar 19	Treasury Stock (53,000*$6 per share)		318,000
8		Cash			318,000
9	May 16	Cash (20,000 shares*$8)		160,000
10		Treasury Stock (20,000*$6 per share)			120,000
11		Paid-In Capital from Sale of Treasury Stock (20,000*$2)			40,000
12	Aug. 25	Cash (5,200*$5)		26,000
13		Paid-In Capital from Sale of Treasury Stock (5,200*$1)		5,200
14		Treasury Stock (5,200*$6)			31,200
15	Dec 6	Cash Dividends (Working Note 1)		303,290
16		Cash Dividends Payable			303,290
17	Dec 31	Cash Dividends Payable		303,290
18		Cash			303,290

Working Note:-

1) Total Preferred stock shares outstanding on Dec 6 = Beg. Bal+Issued on Feb. 10

= 83,900 shares+10,700 shares = 94,600 shares

Preferred Dividend = 94,600 shares*$0.50 per share = $47,300

Total Common stock outstanding on Dec 6 = Beg. Bal.+Issued on Jan 5-Treasury stock bal

= 2,120,000+467,700-(53,000-20,000-5,200)

= 2,120,000+467,700-27,800 = 2,559,900 shares

Common Stock Dividends = 2,559,900 shares*$0.10 per share = $255,990

Total cash dividends payable = Preferred Dividends+Common Stock Dividends

= $47,300+$255,990 = $303,290