Question

Swifty Company reported the following amounts in the stockholders’ equity section of its December 31, 2019,...

Swifty Company reported the following amounts in the stockholders’ equity section of its December 31, 2019, balance sheet.

Preferred stock, 10%, $100 par (10,000 shares authorized, 1,800 shares issued) $180,000
Common stock, $5 par (93,000 shares authorized, 18,600 shares issued) 93,000
Additional paid-in capital 130,000
Retained earnings 467,000
   Total $870,000


During 2020, Swifty took part in the following transactions concerning stockholders’ equity.

1. Paid the annual 2019 $10 per share dividend on preferred stock and a $2 per share dividend on common stock. These dividends had been declared on December 31, 2019.
2. Purchased 1,500 shares of its own outstanding common stock for $41 per share. Swifty uses the cost method.
3. Reissued 800 treasury shares for land valued at $35,600.
4. Issued 550 shares of preferred stock at $104 per share.
5. Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $46 per share.
6. Issued the stock dividend.
7. Declared the annual 2020 $10 per share dividend on preferred stock and the $2 per share dividend on common stock. These dividends are payable in 2021.

a.) Prepare journal entries to record the transactions described above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.)

b.) Prepare the December 31, 2020, stockholders’ equity section. Assume 2020 net income was $327,000. (Enter account name only .Do not provide any descriptive information.)

Homework Answers

Answer #1

a. In the books of Swifty Company:

Transaction/ Event General Journal Debit Credit
$ $
1. Dividends Payable: Preferred Stock 18,000
Dividends Payable: Common Stock 37,200
Cash 55,200
2. Treasury Stock ( 1,500 shares @ $ 41 ) 61,500
Cash 61,500
3. Land 35,600
Paid-in Capital: Treasury Stock 2,800
Treasury Stock ( 800 shares @ $ 41 ) 32,800
4. Cash 57,200
Preferred Stock 55,000
Additional Paid-in Capital 2,200
5. Retained Earnings ( 17,900 shares x 10 % x $ 46 ) 82,340
Common Stock Dividend Distributable 8,950
Additional Paid-in Capital 73,390
6. Common Stock Dividend Distributable 8,950
Common Stock 8,950
7. Retained Earnings 62,880
Dividends Payable: Preferred Stock 23,500
Dividends Payable: Common Stock ( 17,900 x 1.10 x $ 2 ) 39,380
8. Income Summary 327,000
Retained Earnings 327,000

b.

Swifty Company
Balance Sheet ( Partial )
December 31, 2020
Stockholders Equity
Preferred Stock. $ 235,000
Common Stock 101,950
Additional Paid-in Capital 205,590
Paid-in Capital: Treasury Stock 2,800
Retained Earnings 648,780
Treasury Stock ( 700 shares at cost ) (28,700)
Total Stockholders Equity $ 1,165,420
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