Mintzberg, Inc. begins business on January 1, 2015 and is setup as a c-corp. On
ID: 2472156 • Letter: M
Question
Mintzberg, Inc. begins business on January 1, 2015 and is setup as a c-corp.
On 12/31/15 they declared total dividends of $ 1,400,000 and they had the following in their equity section (after adjusting for dividends):
Common stock – 3,000,000 auth, $1 par-value, 1,500,000 issued $ 1,500,000
Preferred stock – 200,000 auth, 9%, $100 par-value, 100,000 issued $ 10,000,000
Treasury stock – 50,000 @ $40/share $ 2,000,000
Retained earnings $ 4,525,000
Additional paid-in capital $ 67,000,000
The following are selected transactions from the fiscal-year 2016:
January 10 – Mintzberg pays the dividends they declared in 2015.
February 23 – Mintzberg issues 10,000 shares of preferred stock for $225 / share.
April 3 – Mintzberg re-issues 15,000 shares of common stock (currently in treasury stock) for $28 / share.
June 13 – In exchange for 5,000 shares of unissued common stock, one of the owners of Mintzberg contributes a piece of machinery. The machinery is currently valued at $ 250,000.
December 31 – Mintzberg ends the year with $ 9,300,000 of net income ($12,000,000 of revenue and $2,700,000 of expenses). They close out net income to retained earnings and the board declares total dividends (preferred and common) of $2,200,000 to be paid on Jan 15 of the following year.
Please prepare the journal entries for all of the above transactions in 2016.
Explanation / Answer
10-Jan Dividends payable Dr 1400000 Cash Cr 1400000 ( To record payment of dividend payable) 23-Feb Cash Dr 2250000 preferred stock Cr 1000000 Additional paid in capital - preferred stock Cr 1250000 ( To record issuing of preference stock @ 225) 3-Apr Cash Dr 420000 Discount on Issue of treasury stock Dr 180000 Treasury stock Cr 600000 ( to record reissuance of treasury stock @ 28/-) 13-Jun Machinery Dr 250000 Common stock Cr 5000 Additional paid in capital Cr 245000 ( To record issuance of common stock in lieu of machinery) 31-Dec Retained earnings Dr 2700000 Expenses Cr 2700000 ( to record closure of expenses) Revenue Dr 12000000 Retained earnings Cr 12000000 ( To record closure of income) Retained earnings Dr 2200000 Dividend payable Cr 2200000 ( To record dividends declared)