Fotey Corporation has the following capital structure at the beginning of the ye
ID: 2428442 • Letter: F
Question
Fotey Corporation has the following capital structure at the beginning of the year: 6% Preferred stock, $50 par value, 20,000 shares authorized, 6,000 shares issued and outstanding $ 300,000 Common stock. $10 par value, 60,000 shares authorized, 40,000 shares issued and outstanding 400,000 Paid-in capital in excess of par 110,000 Total paid-in capital 810,000 Retained earnings 440,000 Total stockholders' equity $1,250,000 Instructions Record the following transactions which occurred consecutively (show all calculations), A total cash dividend of $90,000 was declared and payable to stockholders of record. Record dividends payable on common and preferred stock in separate accounts A 10% common stock dividend was declared. The average market value of the common stock is $18 is share. Assume that net income for the year was $150,000 (record the closing entry) and the board of directors approbated $70,000 of retained earnings for plant expansion. Construct the stockholders' equity section incorporating all the above information.Explanation / Answer
DR Retained earnings 90,000 CR Dividends payable-preferred 18,000 (300,000*6%) CR Dividends payable-common 72,000 DR Retained earnings 72,000 (40,000*.10* $18) CR Common stock 40,000 (4,000 *$10 par) CR Paid in capital 32,000 DR P/L Clearing account 150,000 CR Retained earnings 150,000 DR Retained earnings 70,000 CR Retained earnings -appropriated 70,000 Preferred stock 300,000 Common Stock 440,000 PIC 142,000 Total PIC 882,000 R/E Unappropriated 358,000 R/E Appropriated 70,000 Total R/E 428,000 Total Equity 1,310,000