Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01

Question

Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2018, 430 shares of preferred stock and 5,300 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2018: March 1 Issues 2,400 shares of common stock for $55 per share. May 15 Purchase 530 shares of treasury stock for $48 per share. July 10 Reissues 330 shares of treasury stock purchased on May 15 for $53 per share. October 15 Issues 330 shares of preferred stock for $58 per share. December 1 Declare a cash dividend on both common and preferred stock of $1.80 per share to all stockholders of record on December 15. (Hint: Dividends are not paid on treasury stock.) December 31 Pay the cash dividends declared on December 1. Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2018: Preferred Stock, $430; Common Stock, $53; Additional Paid-in Capital, $82,500; and Retained Earnings, $33,100. Net income for the year ended December 31, 2018, is $13,400. References

Explanation / Answer

Date Account Title and explanations Debit($) Credit($) 2018 Mar-01 Cash 132000 Paid in capital in excess of par - common stock 131976 Common stock 24 (common stock issued) May-15 Treasury stock-at cost 25440 Cash 25440 (purchase of treasury stock) Jul-10 Cash 19140 Treasury stock -at cost 15840 Paid in capital in excess-treasury stock 3300 (reissue of treasury stock at premium) Dec-01 Retained earnings 14274 Cash dividend payable 14274 (cash dividend declared) Dec-31 Cash dividend payable 14274 Cash 14274 (dividend paid) Note: number of shares on which dividend declared Preferred stock = 430 shares Common sotck = 5300+2400-530+330 = 7500 shares

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