Question

Required information

Problem 10-2A Record equity transactions and indicate the effect on the balance sheet equation (LO10-2, 10-3, 10-4, 10-5)

Skip to question

 

[The following information applies to the questions displayed below.]

 

Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2021, 350 shares of preferred stock and 4,500 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2021:

 

March		1		Issue 1,600 shares of common stock for $47 per share.
May		15		Purchase 450 shares of treasury stock for $40 per share.
July		10		Resell 250 shares of treasury stock purchased on May 15 for $45 per share.
October		15		Issue 250 shares of preferred stock for $50 per share.
December		1		Declare a cash dividend on both common and preferred stock of $1.00 per share to all stockholders of record on December 15. (Hint: Dividends are not paid on treasury stock.)
December		31		Pay the cash dividends declared on December 1.

 

Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2021: Preferred Stock, $350; Common Stock, $45; Additional Paid-in Capital, $78,500; and Retained Earnings, $31,500. Net income for the year ended December 31, 2021, is $11,800.

 

Problem 10-2A Part 1

Required:

1. Record each of these transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

 

1-Record the issuance of 1,600 shares of common stock for $47 per share

2-Record the purchase of 450 shares of treasury stock for $40 per share.

3-Record the resell 250 shares of treasury stock purchased on May 15 for $45 per share.

4-Record the issuance of 250 shares of preferred stock for $50 per share.

5-Record the declaration of a cash dividend on both common and preferred stock of $1.00 per share to all stockholders. (Hint: Dividends are not paid on treasury stock.)

6-Record the entry on December 15.

7-Record the cash dividends declared on December 1.

 

 

check_circle

Answer 1

Step 1

Date	Accounting Titles & explanantions	Debit	Credit
March 1	Cash (1,600 x $47)	$75,200
	Common stock (1,600 x$0.01)		$16
	Additional Paid in capital ( balancing figure)		$75,184
May 15	Treasury stock (450 x $40)	$18,000
	Cash		18,000
July 10	Cash (250 x $45)	$11,250
	Additional Paid-in capital( Balancing Figure)		$1,250
	Treasury Stock  (250 x $40)		$10,000
Oct 15	Cash (250 x $50)	$12,500
	Preferred Stock (250 x $1)		$250
	Additional paid-in capital( balancing figure)		$12,250
Dec 1	Dividend	$6,500
	Dividend payable (see Note)		$6,500
Dec 31	Dividend Payable	$6,500
	Cash		$6,500

 

$$$$

Step 2 Computation of Dividend Payable

On preferred Stock

No. of preferred stock  x $1

(350 + 250) x $1 = $600

 

On Common Stock

No of common stock x $1

 

(4,500+1,600-450+250) x $1 = $5,900