Question 1 The stockholders equity accounts of Pronghorn Cor

Question 1 The stockholders\' equity accounts of Pronghorn Corp. on January 1, 2017, were as follows Preferred Stock (6%, $100 par noncumulative, 4,250 shares authorized) Common Stock ($3 stated value, 350,000 shares authorized) Paid-in Capital in Excess of Par Value-Preferred Stock Paid-in Capital in Excess of Stated Value Common Stock Retained Earnings Treasury Stock (4,250 common shares) $255,000 875,000 12,750 560,000 686,000 34,000 During 2017, the corporation had the following transactions and events pertaining to its stockholders\' equity Feb. 1 Issued 5,440 shares of common stock for $32,640 Mar. 20 Purchased 1,500 additional shares of common treasury stock at $9 per share. Oct. 1 Declared a 6% cash dividend on preferred stock, payable November 1 Nov. 1 Paid the dividend declared on October 1 Dec. 1 Declared a $0.50 per share cash dividend to common stockholders of record on December 15, payable December 31, 2017 Dec. 31 Determined that net income for the year was $275,600. Paid the dividend declared on December 1

Solution

Correct Journal entry on December 1^st for Dividend Payable on Common Stock

Cash Dividends                                                                 $ 145,678.33

               Dividends Payable                                                                            $ 145,678.33

(dividend Payable)

Calculation of Dividends

Number of shares Outstanding on December 15 and Dividend

Opening balance (875000/3)

291666.6667

Less: Opening Treasury stock

-4250

Add: Issued on Feb 1

5440

Less: additional Treasury stock purchased on mar 20

-1500

Total Common stock on December 15

291356.6667

Dividend per share

0.5

Total Dividend

$ 145,678.33

  

Correct Journal entry on December 31^st for Dividend paid in cash on Common stock.

Dividends Payable                           $ 145,678.33

            Cash                                                          $ 145,678.33

(cash dividend paid on common stock)

Correct Journal entry on December 31^st for deducting Retained earnings with the amount of dividends paid on common stock and preferred stock.

Retained Earnings                            $ 160978.33

              Cash Dividends                                   $ 160978.33

(dividends distributed out of Retained Earnings)

PRONGHORN CORP.

Partial Balance sheet

as at December 31st 2017

Shareholder’s equity

Retained Earnings

$      800,621.67

Common stock

$      891,320.00

Preferred Stock

$      255,000.00

Treasury Stock

$      (47,500.00)

Additional Paid in Capital- Common Stock

$      576,320.00

Additional Paid in Capital- Preferred Stock

$        12,750.00

Total Shareholder\'s Equity

$ 2,488,511.67

Notes

Number of shares Outstanding on December 15 and Dividend
Opening balance (875000/3)	291666.6667
Less: Opening Treasury stock	-4250
Add: Issued on Feb 1	5440
Less: additional Treasury stock purchased on mar 20	-1500
Total Common stock on December 15	291356.6667
Dividend per share	0.5
Total Dividend	$ 145,678.33