Pearl Company reported the following amounts in the stockholders’ equity section

Question

Pearl Company reported the following amounts in the stockholders’ equity section of its December 31, 2016, balance sheet. Preferred stock, 9%, $100 par (10,000 shares authorized, 1,800 shares issued) $180,000 Common stock, $5 par (101,500 shares authorized, 20,300 shares issued) 101,500 Additional paid-in capital 130,000 Ret

Prepare journal entries to record the transactions described above

ained earnings 486,000 Total $897,500 During 2017, Pearl took part in the following transactions concerning stockholders’ equity. 1. Paid the annual 2016 $9 per share dividend on preferred stock and a $2 per share dividend on common stock. These dividends had been declared on December 31, 2016. 2. Purchased 1,800 shares of its own outstanding common stock for $41 per share. Pearl uses the cost method. 3. Reissued 700 treasury shares for land valued at $31,400. 4. Issued 510 shares of preferred stock at $104 per share. 5. Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $45 per share. 6. Issued the stock dividend. 7. Declared the annual 2017 $9 per share dividend on preferred stock and the $2 per share dividend on common stock. These dividends are payable in 2018.

Pearl Company reported the following amounts in the stockholders’ equity section of its December 31, 2016, balance sheet.
Preferred stock, 9%, $100 par (10,000 shares authorized, 1,800 shares issued) $180,000 Common stock, $5 par (101,500 shares authorized, 20,300 shares issued) 101,500 Additional paid-in capital 130,000 Retained earnings 486,000    Total $897,500
During 2017, Pearl took part in the following transactions concerning stockholders’ equity.
1. Paid the annual 2016 $9 per share dividend on preferred stock and a $2 per share dividend on common stock. These dividends had been declared on December 31, 2016. 2. Purchased 1,800 shares of its own outstanding common stock for $41 per share. Pearl uses the cost method. 3. Reissued 700 treasury shares for land valued at $31,400. 4. Issued 510 shares of preferred stock at $104 per share. 5. Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $45 per share. 6. Issued the stock dividend. 7. Declared the annual 2017 $9 per share dividend on preferred stock and the $2 per share dividend on common stock. These dividends are payable in 2018.

Explanation / Answer

Solution:-

Given information,

1.Paid the annual 2016 $9 per share dividend on preferred stock and a $2 per share dividend on common stock. These dividends had been declared on December 31, 2016:-

= 1800 * 9

= $16,200

= 20300 * 2

= $40600

= 16,200 + 40600

= $56,800

2.Purchased 1,800 shares of its own outstanding common stock for $41 per share. Pearl uses the cost method:-

= 1800 * 41

=$ 73,800

3.Reissued 700 treasury shares for land valued at $31,400:-

= 700 * 41

=$ 28,700

= 31,400 - 28,700

= $2,700

4.Issued 510 shares of preferred stock at $104 per share:-

= 510 * 104

= $53040

= 510 * 100

= 51000

= 53040 - 51000

= $2040

5.Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $45 per share:-

= (20300 * 10%) * 45

= 2030 * 45

=$ 91350

= 101500 * 10%

= $10150

= 913050 - 10150

= $81,200

6.Issued the stock dividend:-

= 101500 * 10%

=$10150

note :-

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Preferred stock, 9%, $100 par (10,000 shares authorized, 1,800 shares issued) $180,000 Common stock, $5 par (101,500 shares authorized, 20,300 shares issued) $101,500 Additional paid-in capital $130,000 Retained earnings $486,000 Total $897,500

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