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

Question

The following selected accounts appear in the ledger of EJ Construction Inc. at the beginning of the current fiscal year: Preferred 1% Stock, $50 par (100,000 shares authorized, 80,000 shares issued)........$4,000,000 Paid-In Capital in Excess of Par-Preferred Stock............175000 Common Stock, $3 par (5,000,000 shares authorized, 2,000,000 shares issued)...........6.000,000 Paid-In Capital in Excess of Par-Common Stock.........1,500,000 Retained Earnings.......2,350,000 During the year, the corporation completed a number of transactions affecting the stockholders' equity. They are summarized as follows: Issued 500,000 shares of common stock at $8, receiving cash. Issued 10,000 shares of preferred 1% stock at $60. Purchased 50.000 shares of treasury common for $7 per share. Sold 20,000 shares of treasury common for $9 per share. Sold 5,000 shares of treasury common for $6 per share Declared cash dividends of $0.50 per share on preferred stock and $0.08 per share on common stock. Paid the cash dividends. Instructions Journalize the entries to record the transactions. Identify each entry by letter.

Explanation / Answer

Journal entries

Serial

No.

*Preferred dividend;

80000+10000=90000 preferred share outstanding

Preferred dividend=90000×.50=45000

Common stock;

2000000+500000-500000+20000+5000=2475000 common share outstanding

Dividend=2475000×.08=198000

Total dividend=198000+45000=243000

Serial

No.

Account titles debit credit a cash 4000000 Common stock 1500000 Paid in capital in excess of par-common stock 2500000 b cash 600000 Preferred stock 500000 Paid in capital excess of par-preferred stock 100000 c. Treasury stock 350000 Cash 350000 d cash(20000×9) 180000 Treasury stock(20000×7) 140000 Paid in capital from sale of treasury stock(20000×7) 40000 e. Cash(5000×6) 30000 Paid in capital from sale of treasury stock(5000×1) 5000 Treasury stock(5000×7) 35000 f cash dividend 243000* Cash dividend payable 243000 g cash dividend payable 243000 Cash 243000

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