Prepare journal entries for ABC Co.\'s following events. Received charter author
ID: 2486529 • Letter: P
Question
Prepare journal entries for ABC Co.'s following events. Received charter authorizing ABC Co. to issue 20,000 shares of common stock at a par value of dollar 2 per share Issued 6,000 shares of stock, receiving dollar 40,000. Paid the law firm of Lo, Ball and Hyde for their services to help organize the company by sending them two thousand shares of stock. Declared a cash dividend of dollar2 per share, payable on 01/15/09, to holders of record as of 12/15/08. Make the appropriate entry. Make any necessary adjusting entry. Make the appropriate entry. Declared a ten percent (10 percentage) stock dividend, payable on 7/15/09 (ignore the date of record for this event) The market value of the stock is dollar15 per share. Make the appropriate entry. Declared a two-for-one stock split. The market value of the stock is dollar 15 per share. Declared and paid a cash dividend of dollar2 per share (pretend this happens all in one day). Declared and paid a cash dividend of dollar2 per share. Reissued 400 shares of treasury stock at dollar 32 each. Reissued the remaining treasury stock at dollar 10 per share.Explanation / Answer
Date Particulars Debit Credit 5/12/2008 No Entry when common stock is authorised no journal entry is required 6/3/2008 Cash 40000 Common stock 16000 Additional Paid in capital - common stock 24000 issued at 8000 x 2, = 16000 par value excess received = 40000-16000, = 24000 6/4/2008 Organisation cost 4000 Common stock 4000 issued at 2000 x 2par value, = 4000 12/15/2008 Cash Dividend 20000 Cash dividend payable 20000 cash dividend issued as =10000 shares x 2 per share Dividend declared in 11/15/2008 is finalised on 12/15/2008 therefore date 12/15/2008 will be relevant date 12/31/2008 Retained earnings 20000 Cash dividend 20000 Cash dividend deducted from retained earnings 1/15/2009 Cash dividend payable 20000 cash 20000 Dividend paid 6/12/2009 Retained Earnings 15000 Common stock dividend distributable 2000 Additional Paid in capital - common stock 13000 10% stock dividend = 10000 shares x 10% = 1000 shares market price = 15 Amount to be deducted from retained earnings = 1000 x 15, = 15000 market value of dividend Par value = 1000 x 2 and remaining will be credited to additional paid in capital = 13000 7/15/2009 Common stock dividend distributable 2000 Common Stock 2000 Issue of stock dividend 8/15/2009 No entry is required for splitt off only number of shares will double = 11000 outstanding x 2, = 22000 shares par value will be = 2/2 , = 1 per share total par value wil remain same as existing = 11000 x 2, = 22000 after splitt off = 22000 x 1 , =22000 9/15/2009 cash dividend 44000 cash 44000 cash dividend paid on 22000 shares x2 , =44000 10/1/2009 Treasury stock 30000 cash 30000 purchased treasury stock = 1000shares x 30 per share 10/15/2009 cash dividend 42000 cash 42000 cash dividend paid on 21000 shares x2 , =42000 11/15/2009 Cash 12800 Treasury stock 12000 Paid in capital from treasury stock 800 Cost of 400 shares ssold = 400 x 30 , = 12000 addition amount realised = 12800-12000 , = 800 12/15/2009 Cash 6000 Paid in capital from treasury stock 12000 Treasury stock 18000 Cost of 600 treasury stock = 600 x 30, = 18000 sold at 600x 10, = 6000 less amount received = 18000 -6000, = 12000