Question

The stockholder’s equity section of Doc Corporation’s balance as Paid-in Capital
Preferred stock, 9%,$100 par value, non-cumulative,
10,000 shares authorized, 5,000 shares issued
and outstanding............................................................
Common stock, $10 par value, 500,000 shares Authorized, 90,000 shares issued and
90,000 shares outstanding............................................... Paid in capital in excess of par- common stock.......................
Total Paid-in Capital
Retained earnings.........................................................
Total Stockholder’s Equity
The following transactions affecting stockholder’s equity occurred during the year:
of January 1, 2019 is presented below:
$ 500,000
900,000
200,000 $ 1,600,000 900,000 $ 2,500,000
Jan 15 Mar 1 Apr15 May 1 Oct 1
Declared the annual cash dividend on the preferred stock, payable April 15.
Dec 31
Dec 31 Instructions:
Declared a $2 per share cash dividend on the common stock outstanding payable April 15.
Paid the cash dividends declared on January 15 and March 1.
Issued 10,000 shares of common stock for $20 per share.
Declared and issued a 10% stock dividend on the common stock outstanding. The market value of the common stock was $25.
Net Income for the year was $700,000. Closed the income summary account. Close the dividend accounts.

a. Prepare journal entries for the above .
b. Post to the appropriate ledger accounts
c. Prepare a stockholder equity section for December 31, 2019

Answer 1

Journal entries :-

Date	particulars	Debit ($)	Credit ($)
Jan 15	preferred stock dividend expense	45000
	To preferred stock dividend payable		45000
Mar 1	common stock dividend expense	180000
	To common stock dividend payable		180000
April 15	preferred stock dividend payable	45000
	Common stock dividend payable	180000
	to cash		225000
May 1	cash	200000
	To common stock		100000
	to paid in capital of common stock in excess of par value		100000
Oct 1	retained earnings	250000
	To common stock		100000
	To paid in capital of common stock in excess of par value		150000
Dec 31	income summary statement	700000
	To retained earnings		700000
Dec 31	Income summary statement	630000
	To preferred stock dividend expense		450000
	To common stock dividend expense		180000

Appropriate ledger accounts (T-accounts) :-

1. Preferred stock dividend expense

Date	particulars	Amount	Date	Particulars	Amount
Jan 15	preferred stock dividend payable	45000	Dec 31	Income summary statement	45000
		45000			45000

2. Preferred stock dividend payable

Date	Particulars	Amount	Date	Particulars	Amount
Apr 15	cash	45000	Jan 15	preferred stock dividend expense	45000
		45000			45000

3. Common stock dividend expense

Date	Particulars	Amount	Date	Particulars	Amount
Mar 1	common stock dividend payable	180000	Dec 31	income summary statement	180000
		180000			180000

4. Common stock dividend payable

Date	Particulars	Amount	Date	Particulars	Amount
Apr 15	cash	180000	Mar 1	Common stock dividend expense	180000
		180000			180000

5. Cash

Date	Particulars	Amount	Date	Particulars	Amount
May 1	common stock	100000	Apr 15	preferred stock dividend payable	45000
May 1	paid in capital of common stock in excess of par value	100000	Apr 15	common stock dividend payable	180000
	To balance c/f	25000
		225000			225000

6. Common stock

Date	particulars	amount	date	particulars	Amount
Dec 31	by balance c/f	1100000	Jan 1	by balance c/f	900000
			May 1	By cash	100000
			Oct 1	By retained earnings	100000
		1100000			1100000

7. Paid in capital of common stock in excess of par value

Date	Particulars	amount	Date	Particulars	Amount
Dec 32	By balance c/f	450000	Jan1	by balance c/f	200000
			May 1	by cash	100000
			Oct 1	by retained earnings	150000
		450000			450000

8. Retained earnings

Date	particulars	amount	date	particulars	Amount
Oct 1	to common stock	100000	Jan 1	by balance c/f	900000
	To paid in capital of common stock in excess of par value	150000	Dec 31	by income summary statement	700000
Dec 31	To balance c/f	1350000
		1600000			1600000

Stock holders equity :-

Particulars	Amount	Amount
Preferred stock		500000
Common stock	900000
Add :-. Newly issued	100000
Add :- stock dividend	100000	1100000
Paid in capital of common stock in excess of par value	200000
Add :- newly issued shares	100000
Add :- stock dividend	150000	450000
Retained earnings	900000
Add :- net income	700000
Less :- stock dividend	(250000)	1350000
Total		3400000

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