The following selected accounts appear in the ledger of Parks Construction Inc.

Question

The following selected accounts appear in the ledger of Parks Construction Inc. at the beginning of the current fiscal year:

During the year, the corporation completed a number of transactions affecting the stockholders’ equity. They are summarized as follows:

Preferred 2% Stock, $75 par (100,000 shares authorized, 80,000 shares issued) $6,000,000 Paid-In Capital in Excess of Par—Preferred Stock 420,000 Common Stock, $8 par (5,000,000 shares authorized, 3,000,000 shares issued) 24,000,000 Paid-In Capital in Excess of Par—Common Stock 1,850,000 Retained Earnings 115,400,000

Explanation / Answer

Date Account Titles and Explaination Debit Credit 05-Jan Cash (4,00,000 shares X $11) $ 44,00,000 Common stock (4,00,000 X $8) $   32,00,000 Paid - in capital in excess of par - Common stock [($11-$8) X 4,00,000] $   12,00,000 (Being common stock issued) 10-Feb Cash (5,000 shares X $90) $   4,50,000 Preferred stock (5,000 shares X $75) $     3,75,000 Paid - in capital in excess of par - Preferred stock [($90-$75) X 5,000] $         75,000 (Being preferred stock issued) 19-Mar Treasury stock (1,50,000 shares X $10) $ 15,00,000 Cash $   15,00,000 (Being Treasury stockpurchased) 16-May Cash (80,000 shares X $13) $ 10,40,000 Treasury stock (80,000 shares X $10) $     8,00,000 Paid - in - capital from sale of Treasury stock [($13-$10) X 80,000] $     2,40,000 (Being Treasury stock sold) 25-Aug Cash (20,000 shares X $9) $   1,80,000 Paid - in - capital from sale of Treasury stock [($10-$9) X 20,000] $       20,000 Treasury stock (20,000 shares X $10) $     2,00,000 (Being Treasury stock sold) 06-Dec Cash Dividends $   3,28,500 Cash Dividends Payable $     3,28,500 (Being Dividend due for payment recorded) 31-Dec Cash Dividends Payable $   3,28,500 Cash $     3,28,500 (Being Dividend paid) Computation of Dividend: Total number of Common shares outstanding Shares issued = $   30,00,000 Add: Additional stock issued = $     4,00,000 Less: Treasury stock purchase = $   -1,50,000 Add: Sale of Treasury stock = $         80,000 Add: Sale of Treasury stock = $         20,000 Common shares outstanding = $   33,50,000 Dividend @ $0.06 per share = 33,50,000 X $0.06 = $     2,01,000 Total number of Preferred shares outstanding Shares issued = 80000 Add: Additional stock issued = 5000 Preferred shares outstanding = $         85,000 Dividend @ $1.50 per share = 85,000 X $1.50 = $     1,27,500 Total Dividend Payable = $2,01,000 + $1,27,500 = $     3,28,500

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