Major League Apparel has two classes of stock authorized: 5%, $10 par preferred,
ID: 2580325 • Letter: M
Question
Major League Apparel has two classes of stock authorized: 5%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during 2018, its first year of operations:
January 2 Issue 100,000 shares of common stock for $69 per share.
February 14 Issue 59,000 shares of preferred stock for $11 per share.
May 8 Repurchase 10,000 shares of its own common stock for $59 per share.
May 31 Reissue 5,000 shares of treasury stock for $64 per share.
December 1 Declare a cash dividend on its common stock of $0.30 per share and a $29,500 (5% of par value) cash dividend on its preferred stock payable to all stockholders of record on December 15. The dividend is payable on December 30. (Hint: Dividends are not paid on treasury stock.)
December 30 Pay the cash dividends declared on December 1.
Explanation / Answer
Journal Entries:-
Date Particulars Debit Credit
2 Jan. Cash A/c Dr 69,00,000
To Common Stock A/c 1,00,000
To Security Premium A/c 68,00,000
14 Feb. Cash A/c Dr 6,49,000
To Preferred Stock A/c 5,90,000
To Security Premium A/c 59,000
8 May Common Stock A/c Dr 10,000
Security Premium A/c Dr 5,80,000
To Cash A/c 5,90,000
31 May Cash A/c Dr 3,20,000
To Treasury Stock A/c 5,000
To Security Premium A/c 3,15,000
30 Dec. Dividend on Common Stock A/c Dr 27,000
Dividend on Preferred Stock A/c Dr 29,500
To Cash A/c 56,500
30 Dec. General Reserve A/c Dr 56,500
To Dividend A/c 56,500
Date Particulars Debit Credit
2 Jan. Cash A/c Dr 69,00,000
To Common Stock A/c 1,00,000
To Security Premium A/c 68,00,000
14 Feb. Cash A/c Dr 6,49,000
To Preferred Stock A/c 5,90,000
To Security Premium A/c 59,000
8 May Common Stock A/c Dr 10,000
Security Premium A/c Dr 5,80,000
To Cash A/c 5,90,000
31 May Cash A/c Dr 3,20,000
To Treasury Stock A/c 5,000
To Security Premium A/c 3,15,000
30 Dec. Dividend on Common Stock A/c Dr 27,000
Dividend on Preferred Stock A/c Dr 29,500
To Cash A/c 56,500
30 Dec. General Reserve A/c Dr 56,500
To Dividend A/c 56,500
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