Question

Major League Apparel has two classes of stock authorized: 6%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during 2021, its first year of operations: January 2 Issue 110,000 shares of common stock for $67 per share. February 14 Issue 57,000 shares of preferred stock for $12 per share. May 8 Purchase 11,000 shares of its own common stock for $57 per share. May 31 Resell 5,500 shares of treasury stock for $62 per share. December 1 Declare a cash dividend on its common stock of $0.40 per share and a $34,200 (6% of par value) cash dividend on its preferred stock payable to all stockholders of record on December 15. The dividend is payable on December 30. (Hint: Dividends are not paid on treasury stock.) December 30 Pay the cash dividends declared on December 1.

Record each transcation.

Answer 1

Journal entries
date	Particulars			Debit	Credit
02-Jan	Cash (110000*67)			7370000
	common stock (110000*1)				110000
	additional paid in capital				7260000
14-Feb	Cash (57000*12)			684000
	preferred stock (57000*10)				570000
	additional paid in capital				114000
08-May	treasury stock (11000*57)			627000
	cash				627000
31-May	Cash (5500*62)			341000
	treasury stock (5500*57)				313500
	additional paid in capital				27500
01-Dec	dividend (110000-11000+5500)*0.40+34200			76000
	dividend payable				76000
15-Dec	no entry
30-Dec	dividend payable			76000
	cash				76000