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Chapter 13: Q26E (page 713)

Journalizing issuance of stock and treasury stock transactions

Stock transactions for Careful Driving School, Inc. follow:

Mar. 4 Issued 27,000 shares of \(1 par value common stock at \)10 per share.

May 22 Purchased 1,300 shares of treasury stock—common at \(13 per share.

Sep. 22 Sold 500 shares of treasury stock—common at \)23 per share.

Oct. 14 Sold 800 shares of treasury stock—common at $9 per share.

Short Answer

Expert verified

Cash is debited with $270,000; Common stock$27,000 and Paid- in capital in excess of par$243,000 is credited.

Treasury stockis debited; Cashis credited with $16,900

Cash is debited $11,500; Treasury stock$6,500 and Paid- in capital in excess of par$5,000 is credited.

Cash$7,200 and Paid- in capital in excess of par$3,200 is debited; Treasury stock$10,400 is credited.

Step by step solution

01

Basic Introduction

Workings:

Common stock (27,000* $1)

Paid- in capital in excess of par ($270,000- $27,000)

Treasury stock (1,300* $13)

Treasury stock (500* $13)

Paid- in capital in excess of par ($500* $10)

Paid- in capital in excess of par ($800* $4)

Treasury stock (800* $9)

02

Journals

Date

Transaction

Debit

Credit

Mar.4

Cash

$270,000

Common stock

$27,000

Paid- in capital in excess of par

$243,000

To record issue of common stock

May 22

Treasury stock

$16,900

Cash

$16,900

To record purchase of treasury stock

Sep 22

Cash

$11,500

Treasury stock

$6,500

Paid- in capital in excess of par

$5,000

To record sell of treasury stock

Oct 14

Cash

$7,200

Paid- in capital in excess of par

$3,200

Treasury stock

$10,400

To record sell of treasury stock

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Most popular questions from this chapter

Identifying advantages and disadvantages of a corporation

Following is a list of advantages and disadvantages of the corporate form of business. Identify each quality as either an advantage or a disadvantage.

b. Entity has continuous life.

A Identifying sources of equity, stock issuance, and dividends

Voyage Comfort Specialists, Inc. reported the following stockholders’ equity on its balance sheet at June 30, 2018:

Preferred Stock—7%, ? Par Value; 625,000 shares

authorized, 280,000 shares issued and outstanding

Paid-In Capital:

\( 1,400,000

1,340,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 2,900,000

Total Paid-In Capital 5,640,000

Retained Earnings 12,000,000

Total Stockholders’ Equity \) 17,640,000

Common Stock—$1 Par Value; 3,000,000 shares

authorized, 1,340,000 shares issued and outstanding

Requirements

3. Make two summary journal entries to record issuance of all the Voyage Comfort Specialists’ stock for cash. Explanations are not required.

Computing dividends on preferred and common stock and journalizing

The following elements of stockholders’ equity are from the balance sheet of Sneed Marketing Corp. at December 31, 2017:

800,000

Preferred Stock—4%, \(2 Par Value; 80,000 shares

authorized, 55,000 shares issued and outstanding

Paid-In Capital:

\) 110,000

Stockholders’ Equity

Common Stock—\(0.10 Par Value; 8,750,000 shares

authorized, 8,000,000 shares issued and outstanding

Sneed paid no preferred dividends in 2017.

Requirements

1. Compute the dividends to the preferred and common shareholders for 2018 if total dividends are \)185,000 and assuming the preferred stock is noncumulative. Assume no changes in preferred and common stock in 2018.

On August 1, Hagino Corporation declared a $1.50 per share cash dividend on its common stock (20,000 shares) for stockholders on record as of August 15. Hagino paid the dividend on August 31. Journalize the entries declaring the cash dividend and paying the dividend.

Question: Dividing cash dividends between preferred and common stock

Copperhead Trust has the following classes of stock:

Preferred Stock—6%, \(12 par value; 8,500 shares authorized, 7,000 shares issued and outstanding

Common Stock—\)0.10 par value; 2,100,000 shares authorized, 1,400,000 shares issued and outstanding

Requirements

1. Copperhead declares cash dividends of $44,000 for 2018. How much of the dividends goes to preferred stockholders? How much goes to common stockholders?
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