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Problem 10-6A Record equity transactions and prepare the stockholders' equity section (LO10-2, 10-3, 10-4, 10-5, 10-7)

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Major League Apparel has two classes of stock authorized: 6%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during 2021, its first year of operations:

January		2		Issue 110,000 shares of common stock for $57 per share.
February		14		Issue 47,000 shares of preferred stock for $12 per share.
May		8		Purchase 11,000 shares of its own common stock for $47 per share.
May		31		Resell 5,500 shares of treasury stock for $52 per share.
December		1		Declare a cash dividend on its common stock of $0.65 per share and a $28,200 (6% of par value) cash dividend on its preferred stock payable to all stockholders of record on December 15. The dividend is payable on December 30. (Hint: Dividends are not paid on treasury stock.)
December		30		Pay the cash dividends declared on December 1.

Problem 10-6A Part 1

Required:

1. Record each of these transactions. (If no entry is required for a particular transaction, select "No Journal Entry Required" in the first account field.)

2. Prepare the stockholders’ equity section of the balance sheet as of December 31, 2021. Net income for the year was $477,000. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

1.

Date	General Journal	Debit	Credit
Jan-02	Cash (110,000*$57)	$   6,270,000
	Common stock (110,000*$1)		$      110,000
	Paid in capital in excess of par - Common stock		$   6,160,000
Feb-14	Cash (47,000*$12)	$      564,000
	Preferred stock (47,000*$10)		$      470,000
	Paid in capital in excess of par - Preferred stock		$        94,000
May-08	Treasury stock (11,000*$47)	$      517,000
	Cash		$      517,000
May-31	Cash (5,500*$52)	$      286,000
	Treasury stock (5,500*$47)		$      258,500
	Paid in capital from treasury stock		$        27,500
Dec-01	Cash dividends	$        96,125
	Dividends payable common stockholders (110,000-11,000+5,500)*$0.65)		$        67,925
	Dividends payable preferred stockholders		$        28,200
Dec-30	Dividends payable common stockholders	$        67,925
	Dividends payable preferred stockholders	$        28,200
	Cash		$        96,125

2.

Major League Apparel
Balance Sheet (partial)
December 31, 2021
Paid in capital
Contributed capital
Capital stock
Common stock ($1 par value, 110,000 shares issued and 104,500 shares outstanding)	$      110,000
Preferred stock ($10 par value, 6% 47,000 shares issued and outstanding)	$      470,000
Total capital stock		$      580,000
Additional paid in capital
Paid in capital In excess of stated value - Common stock	$   6,160,000
Paid in capital In excess of par - Preferred stock	$         94,000
Paid in capital from treasury stock	$         27,500
Total additional paid in capital		$   6,281,500
Total contributed capital		$   6,861,500
Retained earnings ($477,000-$96,125)		$      380,875
Total contributed capital and retained earnings		$   7,242,375
Less: Treasury stock (5,500 common shares)		$    (258,500)
Total stockholders Equity		$   6,983,875

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