Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01
ID: 2592365 • 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 2018, 460 shares of preferred stock and 5,600 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2018:
March 1 Issues 2,700 shares of common stock for $58 per share.
May 15 Purchase 560 shares of treasury stock for $51 per share.
July 10 Reissues 360 shares of treasury stock purchased on May 15 for $56 per share.
October 15 Issues 360 shares of preferred stock for $61 per share.
December 1 Declare a cash dividend on both common and preferred stock of $2.10 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, $460; Common Stock, $56; Additional Paid-in Capital, $84,000; and Retained Earnings, $33,700. Net income for the year ended December 31, 2018, is $14,000.
Journal Entry
1) Record the issue of common stock.
2) Record the purchase of treasury stock.
3) Record reissue of treasury stock purchased.
4) Record the issue of preferred stock.
5) Record the declaration of cash dividend.
6) Record the entry on the date of record.
7) Record the payment of cash dividends declared.
Explanation / Answer
DATE
EXPLANATION
DEBIT
CREDIT
1-Mar
CASH
156600
COMMON STOCK
27
ADDITIONAL PAID IN CAPITL
156573
15-May
TREASURY STOCK
28560
CASH
28560
10-Jul
CASH
20160
TREASURY STOCK
18360
ADDITIONAL PAID IN CAPITAL - TREASURY STOCK
1800
15-Oct
CASH
21960
PREFERRED STOCK
360
ADDITIONAL PAID IN CAPITAL-PREFERRED STOCK
21600
1-Dec
RETAINED EARNING
18732
DIVIDEND PAYABLE ON COMMON STOCK
17010
DIVIDEND PAYABLE ON PREFERRED STOCK STOCK
1722
6-
NO ENTRY ON THE DATE OF RECORD
7-
DIVIDEND PAYABLE ON COMMON STOCK
17010
DIVIDEND PAYABLE ON PREFERRED STOCK STOCK
1722
CASH
18732
NO OF COMMON STOCK FOR DIVIDEND
5600+2700-560+360
8100
NO OF PREFERRED STOCK
460+360
820
DATE
EXPLANATION
DEBIT
CREDIT
1-Mar
CASH
156600
COMMON STOCK
27
ADDITIONAL PAID IN CAPITL
156573
15-May
TREASURY STOCK
28560
CASH
28560
10-Jul
CASH
20160
TREASURY STOCK
18360
ADDITIONAL PAID IN CAPITAL - TREASURY STOCK
1800
15-Oct
CASH
21960
PREFERRED STOCK
360
ADDITIONAL PAID IN CAPITAL-PREFERRED STOCK
21600
1-Dec
RETAINED EARNING
18732
DIVIDEND PAYABLE ON COMMON STOCK
17010
DIVIDEND PAYABLE ON PREFERRED STOCK STOCK
1722
6-
NO ENTRY ON THE DATE OF RECORD
7-
DIVIDEND PAYABLE ON COMMON STOCK
17010
DIVIDEND PAYABLE ON PREFERRED STOCK STOCK
1722
CASH
18732
NO OF COMMON STOCK FOR DIVIDEND
5600+2700-560+360
8100
NO OF PREFERRED STOCK
460+360
820
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