Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01
ID: 2493516 • Letter: D
Question
Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2015, 420 shares of preferred stock and 5,200 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2015: March 1 Issues 2,300 shares of common stock for $54 per share. May 15 Repurchases 520 shares of treasury stock for $47 per share. July 10 Reissues 320 shares of treasury stock purchased on May 15 for $52 per share. October 15 Issues 320 shares of preferred stock for $57 per share. December 1 Declares a cash dividend on both common and preferred stock of $1.70 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, $420; Common Stock, $52; Additional Paid-in Capital, $82,000; and Retained Earnings, $32,900. Net income for the year ended December 31, 2015, is $13,200.
Record each of these transactions.
Required:Explanation / Answer
Mar. 1 Issues 2,300 shares of common stock for $54 per share.
Dr Cash 124,200
Cr Common Stock 23
Cr Paid-in Capital in Excess of Par Value--Common 124,177
May 15 Repurchases 520 shares of treasury stock for $47 per share.
Dr Treasury Stock 24,440
Cr Cash 24,440
Jul. 10 Reissues 320 shares of treasury stock purchased on May 15 for $52 per share.
Dr Cash 16,640
Cr Common Treasury Stock 15,040
Cr Paid-in Capital on Sale of Treasury Stock 1,600
Oct. 15 Issues 320 shares of preferred stock for $57 per share.
Dr Cash 18,240
Cr Preferred Stock 320
Cr Paid-in Capital in Excess of Par Value--Preferred 17,920
Dec. 1
Declares a cash dividend on both common and preferred stock of $1.70 per share to all stockholders of record on December 15. (Hint: Dividends are not paid on treasury stock.)
520 + 320 = 740 shares of preferred stock outstanding
5,200 + 2,300 - 520 + 320 = 7,300 shares of common stock outstanding
(7,300 + 740) x 1.70 = $13,668 total dividends
Dr Retained Earnings 13,668
Cr Dividends Payable 13,668
Dec. 31 Pays the cash dividends declared on December 1.
Dr Dividends Payable 13,668
Cr Cash 13,668
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