Question

Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2021, 390 shares of preferred stock and 4,900 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2021:

March		1		Issue 2,000 shares of common stock for $51 per share.
May		15		Purchase 490 shares of treasury stock for $44 per share.
July		10		Resell 290 shares of treasury stock purchased on May 15 for $49 per share.
October		15		Issue 290 shares of preferred stock for $54 per share.
December		1		Declare a cash dividend on both common and preferred stock of $1.40 per share to all stockholders of record on December 15. (Hint: Dividends are not paid on treasury stock.)
December		31		Pay the cash dividends declared on December 1.

Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2021: Preferred Stock, $390; Common Stock, $49; Additional Paid-in Capital, $80,500; and Retained Earnings, $32,300. Net income for the year ended December 31, 2021, is $12,600.

1. Record each of these transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) And record the cash dividends declared on December 1st.

Date	General Ledger	Debit	Credit

Answer 1

Journal entry

Date	account and explanation	Debit	Credit
Mar 1	Cash (2000*51)	102000
	Common stock (2000*.01)		20
	Paid in capital in excess of par value-Common Stock		101980
May 15	Treasury stock (490*44)	21560
	Cash		21560
July 10	Cash (290*49)	24010
	Treasury stock (290*44)		21560
	Paid in capital from sale of treasury stock		2450
Oct 15	Cash (290*54)	15660
	Preferred stock		290
	Paid in capital in excess of par value-Preferred stock		15370
Dec 1	Cash dividend (7380*1.4)	10332
	Dividend payable		10332
Dec 31	Dividend payable	10332
	Cash		10332