(Equity Transactions and Statement Preparation) On January 5, 2017, Phelps Corporation received a charter granting the right to issue 5,000 shares of \(100 par value, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of \)10 par value common stock. It then completed these transactions.

Jan. 11 Issued 20,000 shares of common stock at \(16 per share.

Feb. 1 Issued to Sanchez Corp. 4,000 shares of preferred stock for the

following assets: equipment with a fair value of \)50,000; a factory

building with a fair value of \(160,000; and land with an

appraised value of \)270,000.

July 29 Purchased 1,800 shares of common stock at \(17 per share. (Use cost

method.)

Aug. 10 Sold the 1,800 treasury shares at \)14 per share.

Dec. 31 Declared a \(0.25 per share cash dividend on the common stock and

declared the preferred dividend.

Dec. 31 Closed the Income Summary account. There was a \)175,700 net

income.

Instructions

1. Record the journal entries for the transactions listed above.
2. Prepare the stockholders’ equity section of Phelps Corporation’s balance sheet as of December 31, 2017.

S.no.

Particular

Debit $

Credit $

January 11

Cash

320,000

Common Stock

200,000

Paid-in Capital in Excess of

Par-common Stock

120,000

To record the issue of stock.

February 1

Equipment

50,000

Building

160,000

Land

270,000

Preferred Stocks

400,000

Paid-in Capital in Excess of Par-preferred

Stock

80,000

To record the issue of stock.

July 29

Treasury Stock

30,600

Cash

30,600

To record the issue of shares.

August 10

Cash

25,200

Retained Earnings

5,400

Treasury Stock

30,600

To record the sale of treasury stock.

S.no.

Particular

Debit $

Credit $

December 31

Retained earnings

37,000

Dividend Payable

37,000

To record the declaration of dividend.

S.no.

Particular

Debit $

Credit $

December 31

Income Summary

175,700

Retained Earnings

175,700

To record the closing of income summary.

PHELPS CORPORATION

Stockholders’ Equity

December 31, 2014

Capital Stock

Preferred stock-par value $100 per share,

8% cumulative and nonparticipating,5,000

Shares authorized,4,000 shares issued and

outstanding

$400,000

Common stock –par value $10 per share,

50,000 shares authorized,

20,000 shares issued and outstanding

Total capital stock

200,000

600,000

Additional paid-in-capital

In excess of par-preferred $ 80,000

In excess of par-common 120,000

Total paid-in capital

200,000

800,000

Retained Earnings

133,300

Total stockholders’ Equity

$933,300