Question

Refer to the following transactions.

a. Issued 7,000 shares of $100 par value preferred stock at par.
b. Issued 4,200 shares of $100 par value preferred stock in exchange for land that had an appraised value of $428,400.
c. Issued 48,000 shares of $5 par value common stock for $16 per share.
d. Purchased 15,000 shares of common stock for the treasury at $18 per share.
e. Sold 9,000 shares of the treasury stock purchased in transaction d for $21 per share.
f. Declared a cash dividend of $1.75 per share on the preferred stock outstanding, to be paid early next year.
g. Declared and issued an 8% stock dividend on the common stock when the market price per share of common stock was $25.

1. Show the effect (if any) of each of the above transactions on each financial statement category by selecting a plus (+) or minus (–) and the amount in the appropriate column. Do not show items that affect net income in the retained earnings column. You should assume that the transactions occurred in the listed chronological sequence and that no stock had been previously issued. (Hint: Remember to consider appropriate effects of previous transactions.)
2. Prepare the journal entries to record each of the above transactions.

Answer 1

Answer:

1 a) + asset , + preferred stock

b) + asset , + preferred stock

c) + assets , + stockholder's equity

d) - and + Asset

e) + -Asset

f) - Equity , + liability

g) - Equity , - Asset

journal entry

a) Debit bank 700000 Credit Preferred stock 700000

b) debit land 420000 , credit preferred stock 420000

c) debit bank 768000 credit stockholder's equity 768000

d) Debit investment 270000 credit bank 270000

e) Debit bank 189000 , credit investment 189000

f) Debit dividend 19600 credit shareholders for dividends 19600

g) debit dividends 96000  credit bank 96000

Explanation:

dividends preferred = 7000 + 4200 = 11200 * 1 . 75 = 19600

dividends common stock = 48000 * 25 * 8 % = 96000