Daviscorporation was authorized to issue 100,000 share of $10 par common stock a

Question

Daviscorporation was authorized to issue 100,000 share of $10 par common stock and 50,000 shares of $50 par, 6 percent, cumulative preferred stock. Davis Corporation completed the following transactions during the first two years of operation.
2012
Jan 2 Issued 5,000 shares of $10 par common stock for $28 per share
Jan 15 Issued 1,000 shares of $50 par preferred stock for $70 per share.
Feb 14 Issued 15,000 shares of $10 par common stock for $30 per share
Dec 31 During the year, earned $170,000 of cash service revenue and paid $110,000 of cash operating expenses.
Dec 31 Declared the cash dividend on outstanding shares of preferred stock for 2012. The dividend will be paid on January 31 to stockholders of record on January 15, 2013.
2013
Jan 31 Paid cash dividend declared on December 31 2012
Mar 1 Issued 2,000 shares of $50 par preferred stock for $58 per share
Jan 1 Purchased 500 shares of common stock as treasury stock at $43 per share
Dec 31 During the year, earned $210,000 of cash service revenue and paid $175,000 of cash operating expenses.
Dec 31 Declared the dividend on the preferred stock and a $.60 per share dividend on the common stock.
Required:
A) Organize the transation data in accounts under an accounting equation.
B) Prepare the stockholders equity section of the balance sheet at December 31, 2012
C) Prepare the balance sheet at December 31, 2013.

Explanation / Answer

Issued 5,000 shares of $10 par common stock for $28 per share. Dr Cash 140,000 Cr Paid-In Capital in Excess of Par, Common 90,000 Cr Common Stock 50,000 15 - Issued 1,000 shares of $50 par preferred stock for $70 per share. Dr Cash 70,000 Cr Preferred Stock 50,000 Cr Paid-In Capital in Excess of Par, Preferred 20,000 Feb. 14 - Issued 15,000 shares of $10 par common stock for $30 per share. Dr Cash 450,000 Cr Paid-In Capital in Excess of Par, Common 300,000 Cr Common Stock 150,000 Dec. 31 - During the year, earned $170,000 of cash service revenue and paid $110,000 of cash operating expenses. Dr Income Summary 60,000 Cr Retained Earnings 60,000 31 - Declared the cash dividend on outstanding shares preferred stock for 2012. The dividend will be paid on January 31 to stockholders of record on January 15, 2013. $50,000 x 6% = 3,000 cash dividend Dr Retained Earnings 3,000 Cr Preferred Dividends Payable 3,000 2013 Jan. 31 - Paid the cash dividend declared on December 31, 2012. Dr Preferred Dividends Payable 3,000 Cr Cash 3,000 Mar. 1 - Issued 2,000 shares of $50 par preferred stock for $58 per share. Dr Cash 116,000 Cr Preferred Stock 100,000 Cr Paid-In Capital in Excess of Par, Preferred 16,000 June 1 - Purchased 500 shares of common stock as treasury stock at $43 per share Dr Treasury Stock 21,500 Cr Cash 21,500 Dec. 31 - During the year, earned $210,000 of cash service revenue and paid $175,000 of cash operating expenses. Dr Income Summary 35,000 Cr Retained Earnings 35,000 31 - Declared the dividend on the preferred stock and a $0.60 per share dividend on the common stock. ($50,000 + $100,000) x 6% = $9,000 preferred dividends (5,000 + 15,000 - 500) x 0.60 = 11,700 common dividends Dr Retained Earnings 20,700 Cr Common Dividends Payable 11,700 Cr Preferred Dividends Payable 9,000

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