Mission Hills Company reported the following amounts in the stockholders’ equity
ID: 2451687 • Letter: M
Question
Mission Hills Company reported the following amounts in the stockholders’ equity of its December 31, 2015, balance sheet.
Preferred stock, 8%, $100 par (10,000 shares authorized, 2,000 shares issued
$200,000
Common stock, $5 par (100,000 shares authorized, 20,000 shares issues
100,000
Additional paid-in capital
125,000
Retained earnings
450,000
Total
4875,000
During 2016, Mission Hills took part in the following transactions concerning stockholders’ equity.
Paid the annual 2015 $8 per share dividend on preferred stock and a $2 per share dividend on common stock.These dividends had been declared on December 31, 2015.
Purchased 2,700 shares of its own outstanding common stock for $40 per share.Mission Hills uses the cost method.
Reissued 700 treasury shares for land valued at $30,000.
Issued 500 shares of preferred stock at $105 per share.
Declared and issued a 10% stock dividend on the outstanding common stock when the stock is selling for $45 per share.
Declared the annual 2016 $8 per share on the preferred stock and $2 per share dividend on common stock.These dividends are payable in 2017.
Required:
Prepare journal entries to record the transactions described above.
Prepare the December 31, 2016, stockholders’ equity section.Assume 2016 net income was $330,000.
Preferred stock, 8%, $100 par (10,000 shares authorized, 2,000 shares issued
$200,000
Common stock, $5 par (100,000 shares authorized, 20,000 shares issues
100,000
Additional paid-in capital
125,000
Retained earnings
450,000
Total
4875,000
Explanation / Answer
Solution:
Preferred Dividend 80,000 Cash 80,000 Common stock dividend 40,000 Cash 40,000 Treasury Stock 108,000 Cash 108,000 Land 30,000 Common Stock 28,000 Additional Paid in capital 2,000 Cash 52,500 Preferred stock - $ 100 par 50,000 Additional paid in capital 2,500 Dividends on common stock 81,000 Dividends payable 81,000 Dividends on common stock 144,000 Dividends payable 144,000 Dividends on Preferred stock 21,000 Dividends payable 21,000