. The following are the transactions for Smiley, Inc. Prepare the general journa
ID: 2382213 • Letter: #
Question
.
The following are the transactions for Smiley, Inc.
Prepare the general journal entries required to record all of the above transactions.
b. Prepare the stockholders' equity section of Smiley's balance sheet to reflect the transactions you have recorded.
The following are the transactions for Smiley, Inc.
1. The company is authorized to sell 1,000,000 shares of $10 par value common stock and 50,000 shares of $100 par value 6 percent preferred stock. 2. As of the end of the current year, the company has actually sold 550,000 shares of common stock at $12 per share 3. It has also sold 40,000 shares of preferred stock at $110 per share. 4. 40,000 shares have been repurchased at $60 per share and are currently being held in treasury to be used to meet the future requirements of a stock option plan that the company intends to implement.Explanation / Answer
a. Amount received after selling 555000 shares at $12 a share= $ 555000*12 = $ 6,660,000
Amount received after selling 40000 shares at $110 a share= $ 40000*110 = $ 4,400,000
Amount spent after buying 40000 shares at $60 a share = $ 40000*60 = $ 2,400,000
thus, amount left with smiley inc. = ($ 6,660,000 + $ 4,400,000) - 2,400,000
= $ 11,060,000 - $ 2,400,000
= $ 8,660,000
Here are the journal entries to record the transactions
2.
DR Cash 6,600,000
CR Common stock 5,500,000 (550,000*10 par)
CR Paid in capital in excess of par 1,100,000
3.
DR Cash 4,400,000
CR Preferred stock 4,000,000 (40,000*100 par)
CR Paid in capital in excess of par 400,000
3.
DR Treasury stock 2,400,000 (40,000*60)
CR Cash 2,400,000
b.
stockholders' equity section
Common stock ($10 par) 5,500,000
Preferred stock($100 par) 4,000,000
Paid in capital in excess of par 1500000
Treasury stock 2,400,000
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