Question

Jan 10: Articles of incorporation are filed with the state. The state authorized the issuance of 10,000 shares of 5%, $50 par value preferred stock and 200,000 shares of $10 par value common stock.

April 10:  Purchased 400 shares of treasury stock at $18 per share. Accounted for under the cost method.

June 1: Retired 200 shares of treasury stock, these shares were originally sold for $15 per share.

Dec 31. Dividends were declared on preferred stock, as well as $2 per share for common stock.

Record journal entries for the above transactions. Please show the supporting calculations.

Answer 1

Journal Entries are as follows:

Date	Account and Explanation	Debit($)	Credit($)
Jan 10	Cash(10,000 shares*$50)	5,00,000
	Preferred Stock		5,00,000
	(Preferred Stock issued for cash)
Jan 10	Cash(200,000 shares*$10)	2000,000
	Common Stock		2000,000
	(Common Stock issued for cash)
April 10	Treasury Stock(400 Shares *$18)	7200
	Cash		7200
	( Treasury stock purchased for cash )
June 1	Cash(200 share*$15)	3,000
	Excess paid in Capital - Treasury Stock(200share*$3)	600
	Treasury Stock(200 share*$18)		3,600
	(Teasury stocks are sold for cash )
Dec 31	Dividend ($4000,000 + $25,000)	425,0000
	Dividend Payaple - Preferred Stock($500,000*5%)		25,000
	Dividend Payaple - Common Stock($200,000*$2)		4000,000
	(Dividend is declared and payable on Preferred Stock and Common Stock)