Question

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.)

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