Michael, Inc. is authorize to issue 50,000 shares of $50 par value, 8% cumulativ
ID: 2481867 • Letter: M
Question
Michael, Inc. is authorize to issue 50,000 shares of $50 par value, 8% cumulative, preferred stock and 750,000 shares of $5 par value common stock.
Prepare journal entries to record the following transactions that occured during the first year of operations.
a) Jan. 10 sold 96,000 shares of common stock for $10 a share
b) On Dec 1, declared $1.00 per share cash dividen on 96,000 shares common stock outstanding.
c) Dec 15, cash dividend date of record:
d) on Jan 1 the cash dividen was paid to shareholders.
Explanation / Answer
Solution:
Date
Account Title and Explanation
Debit
Credit
a)
Jan 10
Cash A/c Dr. (96,000 * $10)
$960,000
To Common Stock (96,000*5)
$480,000
To Paid in Capital – excess of par Common Stock
$480,000
(Being common stock issued at premium $5 each)
b)
Dec 1
Retained Earnings Dr. (96,000*1)
$96,000
To Dividend Payable
$96,000
(being dividend declared)
c)
Dec 15
No Journal Entry is required on record date
d)
Jan 1
Dividend Payable Dr.
$96,000
To Cash
$96,000
(Being dividend paid)
Date
Account Title and Explanation
Debit
Credit
a)
Jan 10
Cash A/c Dr. (96,000 * $10)
$960,000
To Common Stock (96,000*5)
$480,000
To Paid in Capital – excess of par Common Stock
$480,000
(Being common stock issued at premium $5 each)
b)
Dec 1
Retained Earnings Dr. (96,000*1)
$96,000
To Dividend Payable
$96,000
(being dividend declared)
c)
Dec 15
No Journal Entry is required on record date
d)
Jan 1
Dividend Payable Dr.
$96,000
To Cash
$96,000
(Being dividend paid)