III. Metro Company reported the following amounts in the stockholders’ equity se
ID: 2474375 • Letter: I
Question
III. Metro Company reported the following amounts in the stockholders’ equity section of its balance sheet on 12/31/x1, first year of operations:
Preferred stock, 10%, $100 par (10,000 shares
Authorized, 2,000 shares issued) $200,000
Common stock, $5 par (100,000 shares authorized,
20,000 shares issued)100,000
Paid-in Capital in Excess of Par – Common125,000
Retained Earnings450,000
Total $875,000
During 20x2 and 20x3, Metro took part in the following transactions concerning stockholders’ equity.
Required:
Explanation / Answer
(a) Journal Entries:
(b) stockholders’ equity section as on 12/31/03:
Common stock, $5 par (100,000 shares authorized, 21900 shares issued)
Date Accounts Titles and explanation Debit $ Credit $ 20x2 Dividend for the year 20x1 20000 Dividend for the year 20x2 20000 Cash 40000 (being preferred dividend paid for 20x1 & 2) Cash Dividend 10000 Cash 10000 (being cash dividend paid to common stock for 20x2) Treasury Stock 59500 Cash 59500 (being treasury stock purchased - 1700 common stock) Cash 30000 Treasury Stock 24500 Paid-in Capital in Excess of Par – Common 5500 (being 700 treasury stocks reissued) Cash 53000 Preferred Stock 50000 Paid-in Capital in Excess of Par – Preferred 3000 (being preferred stock issued) Retained Earnings 74100 common stock distributable 9500 Paid-in Capital in Excess of Par – Common 64600 [10% stock dividend on 19000 (20000 - 1000 treasury stock)] common stock distributable 9500 Common Stock 9500 Dividend for the year 20x3 20000 Dividend Payable 20000 (dividend declared on preferred stock) Cash Dividend 20900 Dividend Payable 20900 (cash dividend @ $1 declared on (19000 + 1900=20900) common stock)