The following transactions affect stockholders’ equity during 2015, National Lea

Question

The following transactions affect stockholders’ equity during 2015, National League’s first year of operations: February 2 Issue 1.4 million shares of common stock for $21 per share. February 4 Issue 460,000 shares of preferred stock for $24 per share. June 15 Repurchase 140,000 shares of its own common stock for $16 per share. August 15 Reissue 105,000 shares of treasury stock for $31 per share. November 1 Declare a cash dividend on its common stock of $1.40 per share and a $460,000 (5% of par value) cash dividend on its preferred stock payable to all stockholders on record on November 15. (Hint: Dividends are not paid on treasury stock.) November 30 Pay the dividends declared on November 1. 17. value: 0.69 points Required information Prepare the stockholders’ equity section of the balance sheet as of December 31, 2015. Net income for the year was $4,760,000

Explanation / Answer

Answer: Journal Entry:

2 Feb 2015:

Cash A/C Dr. (1400,000*21)   $2940,0000

   To Common stock A/C (1400,000*5)                   $700,0000

   To Additional Paid-in Capital (difference)               $22400000

February 4, 2015

Cash (460,000 x $24) 11,040,000

    To Preferred Stock (460,000 x $20) 9,200,000

     To Additional Paid-in Capital (difference) $1840000

15 June 2015

Treasury stock A/C Dr. (140000*16)   $2240000

      To cash A/C                                                     $2240000

15 August 2012

Cash A/C Dr. (105000*$31)   $3255000

   To Treasury stock A/C (105000*16)                    $1680000

   To Additional paid in capital                                 $1575000

1 Nov 2015

Dividend A/C Dr.((1365000*$1.40)+$460000)   $2371000

     To Dividend payable A/C                                                $2371000

30 Nov 2015

Dividend payable A/C Dr. $2371000

    To cash A/C      $2371000

      

National League Gear Balance sheet (Stockholder's Equity Section) December 31,2015 Stockholder's equity: Preferred stock,$20 par value 9200000 Common stock,$5 par value 7000000 Additional paid in capital 25815000 Total paid in capital 42015000 Retained earnings 2389000 4760000-2371000 Treasury stock, 35000shares -560000 Total stockholder's equity 43844000

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