Zinnia Company: Zinnia Company incorporated on January 1, 2017. The company had

Question

Zinnia Company:

Zinnia Company incorporated on January 1, 2017. The company had authorized 1,500,000 shares of common stock, with a par value of $5 per share. The company had the following transactions during 2017:

Jan. 15     Issued 50,000 shares of common stock for $8 per share.

Sept. 1   Repurchased 5,000 shares of their common stock for $7 per share.

Nov. 1      Declared a $.50 per share cash dividend to be paid on Dec. 30 to stockholders of record on Dec. 1.

Required:

1. Prepare the necessary journal entries to record the above transactions. (12 points)

2. Assume that Zinnia Company declared a 15% stock dividend on Nov. 1 instead of a cash dividend. If the stock was trading at $10 per share on Nov. 1, what journal entry would the company record on Nov. 1? (3 points)

Explanation / Answer

Answer a

Answer b

15% stock dividend = (50,000 - 5,000) shares * 15 % =6,750 shares

Date General Journal Debit ($) Credit ($) Jan. 15 Cash [50,000 shares * $8] 400,000 Common Stock [50,000 shares * $5] 250,000 Paid in Capital in Excess of Par Value [50,000 shares * $3] 150,000 [To record issue of common stock at premium] Sept. 1 Treasury Stock [5,000 shares * $7] 35,000 Cash 35,000 [To record repurchase of common stock ] Nov. 1 Reained Earnings [(50,000 - 5,000) shares * $0.50] 22,500 Dividends Payable 22,500 [To record cash dividend payable]

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