Question

Refer to the following transactions:

1. Issued 540 shares of $80 par value preferred stock at par.

2. Issued 640 shares of $80 par value preferred stock in exchange for land that had an appraised value of $81,600.

3. Issued 19,000 shares of $4 par value common stock for $10 per share.

4. Purchased 4,750 shares of common stock for the treasury at $10 per share.

5. Sold 1,900 shares of the treasury stock purchased in transaction d for $12 per share.

6. Declared a cash dividend of $2.05 per share on the preferred stock outstanding, to be paid early next year.

7. Declared and issued a 4% stock dividend on the common stock when the market price per share of common stock was $17.

Prepare the journal entries to record each of the above transactions.

Answer 1

Journal entry :

No	accounts & explanation	debit	credit
1	Cash (540*80)	43200
	Preferred stock		43200
	(To record preferred stock)
2	Land	81600
	Preferred stock (640*80)		51200
	Paid in capital in excess of par value-Preferred Stock		30400
	(To record preferred stock)
3	Cash	190000
	Common Stock		76000
	Paid in capital in excess of par value-Common Stock		114000
	(To record common stock)
4	Treasury stock	47500
	Cash		47500
	(To record treasury stock)
5	Cash (1900*12)	22800
	Treasury stock		19000
	Paid in capital from sale of treasury stock		3800
	(To record sale of treasury stock)
6	Cash dividend (540+640)*2.05	2419
	Preferred dividend payable		2419
	(To record dividend declared)
7	Stock dividend (19000-4750+1900)*4%*17	10982
	Common stock dividend distributable		2584
	Paid in capital in excess of par value-Common Stock		8398
	(To record stock dividend declared)