Homework SourseI Some of the account balances of Mali Company at December 3
I. Some of the account balances of Mali Company at December 31, 20x0 are shown below: 6% Preferred Stock ($100 par, 2,000 shares authorized) $ 20,000 PCIEP, Preferred 3,000 Common Stock ($10 par, 100,000 shares authorized) 500,000 PCIEP, Common 100,000 Retained Earnings 304,000 Treasury Stock-Preferred (50 shares at cost) 5,500 Treasury Stock-Common (1,000 shares at cost) 16,000 The price of the company’s common stock has been increasing steadily on the market; it was $21 on January 1, 20x1, advanced to $24 by July 1, and to $27 at the end of the year 20x1. The preferred stock was not openly traded, but was appraised at $120 per share during 20x1. 1) Give the proper journal entries for each of the following occurred in 20x1: (1) The company resold the 50 shares of preferred stock held in the treasury for $116 per share. (2) On July 1, the company declared a 5% stock dividend to the common stockholders. (3) On October 15, the company declared a cash dividend of $100,000. Assume the preferred stock is non-cumulative. Prepare two separate journal entries: common and preferred dividends. 2) Prepare the stockholders’ equity section of the balance sheet at December 31, 20x1
Solution
Answers
Working #1
No. of shares
Par
Issued
Treasury Stock
Outstanding shares
Amount
[A]
[B]
[C]
[B - C]
[D = A x B]
Preferred Stock
100
200
50
150
$ 20,000.00
PCIEP - Preferred Stock
$ 3,000.00
Common Stock
10
50000
1000
49000
$ 500,000.00
PCIEP - Common Stock
$ 100,000.00
Retained Earning
$ 304,000.00
Less:
Cost per share
Treasury Stock - Preferred
50
$ 110.00
$ 5,500.00
Treasury Stock - Common
1000
$ 16.00
$ 16,000.00
Total Stockholder\'s Equity
$ 905,500.00
Working #2
Stock dividend to Common Stock holders
A
No. of common Stock outstanding
$ 49,000.00
B
Stock Dividend rate
5%
C=A x B
No. of shares distributable as stock dividend
2450
D
Market value on Jul 1
$ 24.00
E = C x D
Stock dividend amount
$ 58,800.00
F = C x $10 par
Credited to Common Stock
$ 24,500.00
G = E - F
Credited to PCIEP Common Stock
$ 34,300.00
Working #3
Cash Dividend of $ 100,000
A
Total Cash Dividend
$ 100,000.00
B
No. of Preferred Stock outstanding after reissue of Treasury stock
200
C
Par Value
$ 100.00
D=B x C
Amount of Preferred Stock
$ 20,000.00
E
Dividend rate to Preferred Stock shares
6%
F = D x E
Amount of Dividend to Preferred Stockholders
$ 1,200.00
G = A - F
Amount of Dividend to Common Stock holders
$ 98,800.00
Date/Transaction no /Working
Accounts title
Debit
Credit
1
Cash
$ 5,800.00
Treasury Stock - Preferred
$ 5,500.00
Additional Paid in capital - Treasury Preferred Stock
$ 300.00
(stock reissued)
2 (Jul 1)
Dividend
$ 58,800.00
Working #2
Common Stock
$ 24,500.00
PCIEP - Common Stock
$ 34,300.00
(Stock dividend distributed to o/s sshares)
3 (i) Oct 15
Dividend
$ 1,200.00
Working #3
Cash
$ 1,200.00
(Cash dividend paid to preferred STock)
3 (ii) Oct 15
Dividend
$ 98,800.00
Working #3
Cash
$ 98,800.00
(Cash dividend paid to Common STock)
4
Retained earnings
$ 158,800.00
[100000 + 58800]
Dividend
$ 158,800.00
(Dividend account closed)
5
Additional Paid in capital - Treasury Preferred Stock
$ 300.00
Retained earnings
$ 300.00
(Amount transferred to RE)
Stockholder\'s Equity Section
Paid in Capital:
Preferred Stock
[200 issued & outstanding at $100 par]
$ 20,000.00
PCIEP - Preferred Stock
$ 3,000.00
Common Stock
[52,450 issued, 51,450 outstanding, $10 par]
$ 524,500.00
PCIEP - Common Stock
$ 134,300.00
Total Paid in Capital
$ 681,800.00
Retained Earning
$ 145,500.00
Total
$ 827,300.00
Less: Treasury Stock - Common Stock
$ 16,000.00
Total Stockholder\'s Equity
$ 811,300.00
| Working #1 | |||||
| No. of shares | |||||
| Par | Issued | Treasury Stock | Outstanding shares | Amount | |
| [A] | [B] | [C] | [B - C] | [D = A x B] | |
| Preferred Stock | 100 | 200 | 50 | 150 | $ 20,000.00 |
| PCIEP - Preferred Stock | $ 3,000.00 | ||||
| Common Stock | 10 | 50000 | 1000 | 49000 | $ 500,000.00 |
| PCIEP - Common Stock | $ 100,000.00 | ||||
| Retained Earning | $ 304,000.00 | ||||
| Less: | Cost per share | ||||
| Treasury Stock - Preferred | 50 | $ 110.00 | $ 5,500.00 | ||
| Treasury Stock - Common | 1000 | $ 16.00 | $ 16,000.00 | ||
| Total Stockholder\'s Equity | $ 905,500.00 |
