The following selected accounts appear in the ledger of Parks Construction Inc.
ID: 2610874 • Letter: T
Question
The following selected accounts appear in the ledger of Parks Construction Inc. at the beginning of the current fiscal year:
Preferred 2% Stock, $75 par (100,000 shares authorized, 80,000 shares issued) $6,000,000
Paid-In Capital in Excess of Par—Preferred Stock 420,000
Common Stock, $8 par (5,000,000 shares authorized, 3,000,000 shares issued) 24,000,000
Paid-In Capital in Excess of Par—Common Stock 1,850,000
Retained Earnings 115,400,000
During the year, the corporation completed a number of transactions affecting the stockholders’ equity. They are summarized as follows:
Jan. 5 Issued 400,000 shares of common stock at $11, receiving cash.
Feb. 10 Issued 5,000 shares of preferred 2% stock at $90.
Mar. 19 Purchased 150,000 shares of treasury stock for $10 per share.
May 16 Sold 80,000 shares of treasury stock for $13 per share.
Aug. 25 Sold 20,000 shares of treasury stock for $9 per share.
Dec. 6 Declared cash dividends of $1.50 per share on preferred stock and $0.06 per share on common stock.
31 Paid the cash dividends. Journalize the entries to record the transactions.
Refer to the Chart of Accounts for exact wording of account titles.
Explanation / Answer
Solution:
Journal Entries - Parks Construction INC. Date Particular Debit Credit 5-Jan Bank A/c Dr $4,400,000.00 To Common Stock A/c $3,200,000.00 To Paid in capital in excess of Par - Common Stock $1,200,000.00 (Being 400000 share issued of $8 par value for $11 per share) 5-Feb Bank A/c Dr $450,000.00 To 2% Preferred Stock $375,000.00 To Paid in capital in excess of Par - Preferred Stock $75,000.00 (Being 5000 preference share issued of $75 par value for $90 per share) 19-Mar Treasury Stock A/c Dr $1,500,000.00 To Bank A/c $1,500,000.00 (Being 150000 shares repurchased at $10 per share) 16-May Bank A/c Dr (80000*13) $1,040,000.00 To Treasury Stock $800,000.00 To Additional Paid in Capital $240,000.00 (Being 80000 shares of treasury stock sold at $13 per share) 25-Aug Bank A/c Dr (20000*9) $180,000.00 Additional Paid in Capital A/c Dr $20,000.00 To Treasury Stock $200,000.00 (Being 20000 shares of treasury stock sold at $9 per share) 6-Dec Retained Earnings A/c Dr $328,500.00 To Dividend Payable - Preferred Stock (85000*1.50) $127,500.00 To Dividend Payable - Common Stock [(300000+400000-150000+80000+20000)*0.06] $201,000.00 31-Dec Dividend Payable - Preferred Stock Dr $127,500.00 Dividend Payable - Common Stock Dr $201,000.00 To Bank A/c $328,500.00