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 2015, 200 shares of preferred stock and 2,800 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2015: March 1 Issues 1,000 shares of common stock for $30 per share. May 15 Repurchases 600 shares of treasury stock for $23 per share. July 10 Reissues 100 shares of treasury stock purchased on May 15 for $28 per share. October 15 Issues 100 shares of preferred stock for $33 per share. December 1 Declares a cash dividend on both common and preferred stock of $0.85 per share to all stockholders of record on December 15. (Hint: Dividends are not paid on treasury stock.) December 31 Pays the cash dividends declared on December 1. Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2015: Preferred Stock, $200; Common Stock, $28; Additional Paid-in Capital, $64,000; and Retained Earnings, $24,500. Net income for the year ended December 31, 2015, is $9,600. Taking into consideration all the transactions during 2015, respond to the following for Donnie Hilfiger: 19.value: 4.56 pointsRequired information 2. Prepare the statement of stockholders’ equity for the year ended December 31, 2015. (Amounts to be deducted should be indicated by a minus sign.)

Explanation / Answer

Journal entries are recorded as under:

Stockholderrs equity account is prepared as under:

DATE DESCRIPTION POST. REF. DEBIT CREDIT Mar-01 Cash 30,000    Common Stock 10    Additional paid in capital 29,090 (For 1,000 shares issued at $0.01) May-15 Treasury stock 13,800    Cash 13,800 (For 600 treasury stock purchased) Jul-10 Cash 2,800    Treasury Stock 2,300    Additional paid in capital 500 (For treasury stock sold) Oct-15 cash 3300    Preference shares 100    Additional paid in capital 3200 (For prefernce shares issued) Dec-01 Retained earnings 3,060    dividend payable 3,060 (for dividend declared) 28/0.01 = 2800+1000-600+100= 3300 prefr = 200+100= 300 3600*.85 = 3,060 Dec-31 Dividend Payable 3,060    Cash 3,060 (For dividend paid)

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