Question

Monty Company reported the following amounts in the stockholders’ equity section of its December 31, 2016, balance sheet.

Preferred stock, 9%, $100 par (10,000 shares authorized, 1,800 shares issued)		$180,000
Common stock, $5 par (101,500 shares authorized, 20,300 shares issued)		101,500
Additional paid-in capital		130,000
Retained earnings		486,000
Total		$897,500

During 2017, Monty took part in the following transactions concerning stockholders’ equity.

1.		Paid the annual 2016 $9 per share dividend on preferred stock and a $2 per share dividend on common stock. These dividends had been declared on December 31, 2016.
2.		Purchased 1,800 shares of its own outstanding common stock for $41 per share. Monty uses the cost method.
3.		Reissued 700 treasury shares for land valued at $31,400.
4.		Issued 510 shares of preferred stock at $104 per share.
5.		Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $45 per share.
6.		Issued the stock dividend.
7.		Declared the annual 2017 $9 per share dividend on preferred stock and the $2 per share dividend on common stock. These dividends are payable in 2018.

please explain detail

Answer 1

Solution:

Journal Entries - Monty Company
Event	Particulars	Debit	Credit
1	Dividend payable Dr (1800*$9 + 20300*$2)	$56,800.00
	To Cash		$56,800.00
	(To record dividend payment)
2	Treasury Stock Dr (1800*$41)	$73,800.00
	To Cash		$73,800.00
	(To record purchase of treasury stock)
3	Land Dr	$31,400.00
	To Treasury Stock (700*$41)		$28,700.00
	To Additional paid in Capital		$2,700.00
	(To record purchase of land by reissue of treasury stock)
4	Cash Dr (510*$104)	$53,040.00
	To Preferred stock		$51,000.00
	To Additional paid in Capital		$2,040.00
	(To record issue of preferred stock)
5	Stock Dividends Dr (19200*10%*$45)	$86,400.00
	To Common stock dividend distributable (19200*10%*$5)		$9,600.00
	To Additional paid in Capital (19200*10%*$40)		$76,800.00
	(To record declaration of stock dividend)
6	Common stock dividend distributable Dr	$9,600.00
	To Common stock		$9,600.00
	(To record issue of stock dividend)
7	Cash Dividends Dr (2310*$9 + 21120*$2)	$63,030.00
	To Dividend payable		$63,030.00
	(To record declaration of cash dividend)