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, 470 shares of preferred stock and 5,700 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2018:

March 1 Issues 2,800 shares of common stock for $59 per share.

May 15 Purchase 570 shares of treasury stock for $52 per share.

July 10 Reissues 370 shares of treasury stock purchased on May 15 for $57 per share.

October 15 Issues 370 shares of preferred stock for $62 per share.

December 1 Declare a cash dividend on both common and preferred stock of $2.20 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, $470; Common Stock, $57; Additional Paid-in Capital, $84,500; and Retained Earnings, $33,900. Net income for the year ended December 31, 2018, is $14,200.

I am having trouble with determining the dividends in the account. What values should I include in the equation?

Marcn u1, 2018 Cash 165,200 Common stock 28 Additional paid-in capital 165,172 2 May 15, 2018 Treasury stock 29,640 Cash 29,640 3 July 10, 2018 Cash 21,090 Treasury stock Additional paid-in capital 19,240 1,850 October 15, Cash 4 22,940 2018 Preferred stock 370 Additional paid-in capital 22,570 December 01, Dividend:s 2018 Dividends payable December 15, No journal entry required 2018 December 31. Dividends payable 2018 Cash

Explanation / Answer

Number of Shares Common Stock Preferred Stock Beginning balance 5700 470 Issue of common shares on Mar 1 2800 Purchase of treasury stock on May 15 -570 Issue of Preferred stock on Oct 15 370 Total number of shares outstanding as on Dec 15 7930 840 Dividend per share $2.20 $2.20 Total dividends $17,446.00 $1,848.00 Grand total $19,294.00

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