Andrew Company was incorporated on January 1 2016 under a co

Andrew Company was incorporated on January 1, 2016, under a corporate charter that authorized the issuance of 50,000 shares of $5 par common stock and 20,000 shares of $100 par, 8% preferred stock. The following events occurred during 2016. Andrew wants to record the events and develop financial statements on December 31, 2016.

Required:

a.	Issued for cash 10,000 shares of common stock at $15 per share and 1,000 shares of preferred stock at $105 per share on January 15, 2016.
b.	Acquired a patent on April 1 in exchange for 2,000 shares of common stock. At the time of the exchange, the common stock was selling on the local stock exchange for $32 per share.
c.	Repurchased 3,000 shares of common stock on May 1 at $20 per share. The corporation is holding the stock to be used for an employee bonus plan.
d.	Declared a cash dividend of $1 per share to common stockholders and an 8% dividend to preferred stockholders on July 1. The preferred stock is noncumulative, nonparticipating. The dividend will be distributed on August 1.
e.	Distributed the cash dividend on August 1.
f.	Declared and distributed to preferred stockholders a 10% stock dividend on September 1. At the time of the dividend declaration, preferred stock was valued at $128 per share.
g.	On December 31, calculated the annual net income for the year to be $309,000.

Solution

1)Journal entries: Date Accounts Titles Debit $ Credit $ 2016 15-Jan Cash 255000 common stock 50000 preferred stock 100000 Additional capital paid in-CS 100000 Additional capital paid in - PS 5000 Being issue of 10000 common stock and 1000 preferred stock 1-Apr Patent 64000 common stock 10000 Additional capital paid in-CS 54000 Being 2000 common stock issued for Patent 1-May Employee bonus Plan 60000 cash 60000 (being common stock bought back for Employees bonus plan) 1-Jul Cash dividend 9000 Pref dividend 8000 dividend payable 9000 pref dividend 8000 Being dividend make payable 1-Aug dividend payable 9000 pref dividend 8000 Cash 17000 Being cash dividend paid out 1-Sep stock dividend 25600 Pref stock distributable 20000 Additional capital paid in - PS 5600 (being 10% or 200 pref stock dividend issued @ 128) 31-Dec Income Summary 309000 RE 309000 Being net income transferred to RE 31-Dec RE 42600 dividend 9000 pref divodne 8000 stock dividend 25600 (being dividend transferred to RE) 2\' Stock holder\'s Equity section : Amount $ Authorised: Common stock 50000 shares @ 5 250000 pref stock 20000 shares @ 100 2000000 Issued: Common stock 12000 shares @ 5 60000 pref stock 1000 shares @ 100 100000 Additional capital paid in: Common Stock 154000 Pref Stock 10600 Capital raised 324600 RE 266400 Less: Treasury stock locked for employee bonus plan -60000 Share holder\' s Equity 531000 3. Book value of Common stock = capital + RE = 60000+154000+266400-60000 = $420400