Question

(1) Prepare the journal entries and then prepare the Stockholders' Equity section of Doorman Corp.’s balance...

(1) Prepare the journal entries and then prepare the Stockholders' Equity section of Doorman Corp.’s balance sheet at December 31, 2017. Show the computation of all amounts.

Doorman’s charter authorizes the company to issue 7,000 shares of 10% preferred stock with par value of $140 and 750,000 shares of no-par common stock.


The company issued 1,400 shares of the preferred stock at $140 per share. It issued 187,500 shares of the common stock for a total of $516,000.


The company’s retained earnings balance at the beginning of 2017 was $74,000, and net income for the year was $98,000.


During 2017, Doorman declared the specified dividend on preferred and a $0.25 per-share dividend on common. Preferred dividends for 2016 were in arrears.


Homework Answers

Answer #1

There will be no journal entry for authorizing share capital.

Preferance shares are issued at par, so all amount transferred to preference capital. No par common stock means a share, not issued at discount or premium. So all amount transferred to common share capital

Net income of current year is transferred from profit and loss statement to retained earnings

Dividend calculation

Preferance share = $140 x 10% x 1,400 shares = $19,600

Common shareholders = $0.25 x 187,500 = $46,875

Total Dividend = $66,475

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