Mathewson Inc has the following as part of it\'s stockholders equity at the begi

Question

Mathewson Inc has the following as part of it's stockholders equity at the beginning of the accounting year:

Common Stock ($10 par) 5,000,000 shares authorized 1,000,000 shares issued and outstanding $10,000,000 preferred stock ( $100 par) 500,000 shares authorized, 100,000 issued, 80,000 shares outstanding $10,000,000

Retained Earning $75,000,000

Treasury stock 20,000 preferred shares $3,000,000.

Using the above as needed, record the following in general journal form:

a) Issued 100,000 shares of common stock for cash at $12 per share

b) Issued 50,000 shares of preferred stock for cash at $95 per share

c) sold preferred treasury shares for $102 per share

d) Purchased 10,000 shares of common stock (treasury shares) for $8 per share

e) Declared dividend (cash) of $1 per share on common stock

f) Decared 5% cash dividend on preferred stock

g) Date of record for both dividends

h) Paid common and preferred dividends

i) sold common treasury shares for $12 per share

j) Common stock splits 2 for 1

K) declared common stock dividend of $ 1.50 per share.

Explanation / Answer

Ans-

a) Cash a/c Dr   $1200000

             To Common Stock A/c $1000000

              To premium on issue common stock $200000

(issue 100000 commom stock at a premium of $2/share)

b) Cash A/c Dr    $4750000

     Discount on issue of preferred stock $250000

             To preferred stock a/c $5000000

(issue of 50000 preferred stock at a discount of $5/share)

c) Bank a/c Dr $2040000

               To treasury shares a/c $2040000

(sale of 20000 treasury shares @ $102 each)

d)Common stock A/c Dr $80000

              To Bank A/c $80000

(Purchase 10000 common stock (treasury shares) @ $8 each)

e)Retained earning A/c Dr $200000

           To dividend payable A/c $200000

(cash dividend payable on 200000 common stock @$1 each)

f) Retained earning A/c Dr $750000

           To dividend payable A/c $750000

( 5%cash dividend payable on $15000000 preferred stock )

g) At the end of accounting year

h) Dividend payable A/c Dr $200000

          To cash A/c      $200000

Dividend payable A/c Dr $750000

          To cash A/c     $750000

j) Common stock A/ Dr (1100000*10)       $11000000

      To Common stock A/ (550000*20) $11000000

(Common stock splits 2 for 1)

k) Retained earning A/c Dr $825000

           To dividend payable A/c $825000

( Dividend $ 1.5/share on 550000)

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