Part A In late 2017, the Nicklaus Corporation was formed. The corporate charter
ID: 2551026 • Letter: P
Question
Part A In late 2017, the Nicklaus Corporation was formed. The corporate charter authorizes the issuance of 4,000,000 shares of common stock carrying a $1 par value, and 1,000,000 shares of $5 par value, noncumulative, nonparticipating preferred stock. On January 2, 2018, 2,000,000 shares of the common stock are issued in exchange for cash at an average price of $10 per share. Also on January 2 all 1,000,000 shares of preferred stock are issued at $20 per share. Required 1. Prepare journal entries to record these transactions. 2. Prepare the shareholders' equity section of the Nicklaus balance sheet as of March 31, 2018. (Assume net income for the first quarter 2018 was $1,200,000.) Part B During 2018, the Nicklaus Corporation participated in three treasury stock transactions: a. On June 30,2018, the corporation reacquires 130,000 shares for the treasury at a price of $12 per share. b. On July 31, 2018, 15,000 treasury shares are reissued at $15 per share. c. On September 30, 2018, 15,000 treasury shares are reissued at $10 per share. Required 1. Prepare journal entries to record these transactions. 2. Prepare the Nicklaus Corporation shareholders' equity section as it would appear in a balance sheet prepared at September 30, 2018. (Assume net income for the second and third quarter was $2,650,000.)Explanation / Answer
PART A JOURNAL ENTRIES Date Account Titles and explanation Debit Credit Jan2,2018 Cash $40,000,000 Common Stock par value$1 $2,000,000 (2000000*$1) Additional paid in capital-common stock $ 18,000,000 (2000000*(10-1) Preferred stock par value $5 $ 5,000,000 (1000000*5) Additional paid in capital-preffered stock stock $ 15,000,000 (1000000*(20-5) (To record issuance of common stock and preferred stock for cash) Stochholders Equity Section as on March 31,2018 Preferred stock,$5 par value,,non cumulative, non participating 1000000 authorized, issued and outstanding $ 5,000,000 Common stock $1 par value,400000shares authorized, 2000000 shares issued and outstanding $2,000,000 Additional paid in capital-Common stock $ 18,000,000 Additional paid in capital-Preffered stock $ 15,000,000 Retained earnings $1,200,000 PART B JOURNAL ENTRIES Date Account Titles and explanation Debit Credit June 30,2018 Treasury stock $ 1,560,000 (130000*12) Cash $ 1,560,000 (To record purchase of treasury stocks) July 31,2018 Cash $ 225,000 (15000*15) Treasury stock $ 180,000 (15000*12) Additional paid in capital-common stock $ 45,000 (15000*(15-12) Sep 30,2018 Cash $150,000 (15000*10) Additional paid in capital-common stock $30,000 (15000*(12-10) Treasury stock $180,000 (15000*12) (To record reissuance of of treasury stocks) Stochholders Equity Section as on September 30,2018 Preferred stock,$5 par value,,non cumulative, non participating 1000000 authorized, issued and outstanding $ 5,000,000 Common stock $1 par value,400000shares authorized, 2000000 shares issued and outstanding $2,000,000 Additional paid in capital-Common stock $ 18,015,000 (18000000+45000-30000) Additional paid in capital-Preffered stock $ 15,000,000 Retained earnings $1,200,000 Treasury stock $ (1,200,000) (1560000-180000-180000)