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, 320 shares of preferred stock and 4,200 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2015: RECORD EACH OF THESE TRANSACTIONS

March 1 Issues 1,300 shares of common stock for $44 per share.

May 15 Repurchases 420 shares of treasury stock for $37 per share.

July 10 Reissues 220 shares of treasury stock purchased on May 15 for $42 per share.

October 15 Issues 220 shares of preferred stock for $47 per share.

December 1 Declares a cash dividend on both common and preferred stock of $0.70 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, $320; Common Stock, $42; Additional Paid-in Capital, $77,000; and Retained Earnings, $30,900. Net income for the year ended December 31, 2015, is $11,200.

Explanation / Answer

Journal entry :

Date accounts & explanation debit credit Mar 1 Cash a/c (1300*44) 57200     Common stock (1300*.01) 13      Paid in capital in excess of par value-common stock 57187 (To record issue of common stock) May 15 Treasury stock a/c 15540      Cash a/c (420*37) 15540 (TO record treasury stock purchased) July 10 Cash a/c (220*42) 9240     Treasury stock a/c (220*37) 8140     Paid in capital from sale of treasury stock (220*5) 1100 (To record sale of tresury stock) Oct 15 Cash a/c 10340     Preferred share a/c (220*1) 220      Paid in capital in excess of par value (220*46) 10120 (To record issue of preferred stock) Dec 1 Dividend a/c 3934    Dividend payable -preferred dividend (540*.70) 378    Dividend payable-common stock (5080*.70) 3556 (TO record dividend declared) Dec 15                 No entry Dec 31 Dividend payable -preferred dividend (540*.70) 378 Dividend payable-common stock (5080*.70) 3556         Cash a/c     3934 (To record dividend paid)

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