Question

Selected Stock Transactions

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

Preferred 2% Stock, $150 par (80,000 shares authorized, 40,000 shares issued)	$6,000,000
Paid-In Capital in Excess of Par—Preferred Stock	960,000
Common Stock, $15 par (800,000 shares authorized, 330,000 shares issued)	4,950,000
Paid-In Capital in Excess of Par—Common Stock	640,000
Retained Earnings	26,606,000

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

1. Issued 80,000 shares of common stock at $18, receiving cash.
2. Issued 20,000 shares of preferred 2% stock at $168.
3. Purchased 48,000 shares of treasury common for $19 per share.
4. Sold 24,000 shares of treasury common for $22 per share.
5. Sold 16,000 shares of treasury common for $17 per share.
6. Declared cash dividends of $3.00 per share on preferred stock and $0.06 per share on common stock.
7. Paid the cash dividends.

Required:

Journalize the entries to record the transactions.

For a compound transaction, if an amount box does not require an entry, leave it blank.

a. Issued 80,000 shares of common stock at $18, receiving cash.

	Cash
	Common Stock
	Paid-In Capital in Excess of Par-Common Stock

b. Issued 20,000 shares of preferred 2% stock at $168.

	Cash
	Preferred Stock
	Paid-In Capital in Excess of Par-Preferred Stock

c. Purchased 48,000 shares of treasury common for $19 per share..

	Treasury Stock
	Cash

d. Sold 24,000 shares of treasury common for $22 per share.

	Cash
	Treasury Stock
	Paid-In Capital from Sale of Treasury Stock

e. Sold 16,000 shares of treasury common for $17 per share.

	Cash
	Paid-In Capital from Sale of Treasury Stock
	Treasury Stock

f. Declared cash dividends of $3 per share on preferred stock and $0.06 per share on common stock.

	Cash Dividends
	Cash Dividends Payable

g. Paid the cash dividends.

	Cash Dividends Payable
	Cash

Answer 1

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Preferred stock: The stock that provides a fixed amount of return (dividend) to its stockholder before paying dividends to common stockholders is referred as preferred stock.  

Cash dividends: The amount of cash provided by a corporation out of its distributable profits to its shareholders as a return for the amount invested by them is referred as cash dividends.  

Treasury Stock: It refers to the shares that are reacquired by the corporation that are already issued to the stockholders, but reacquisition does not signify retirement.

ToJournalize: The entries to record the transactions.

a)

Description:

• Cash is an asset account. The amount is increased, because cash is received upon stockissued. Therefore, debit cash account with the amount of cash received.  

Common stock is a stockholders' equity account and the amount is increased due to issuance of common stock. Therefore, credit common stock account with the value of common stock.  

Paid - in Capital in Excess of Par Value - Common stock is a stockholders' equity account and the amount is increased due to increase in capital. Therefore, credit Paid - in Capital in Excess of Par Value account with the excess amount of cash recieved over common stock value.

b.

c

.