Question

A−Cell Wireless needed additional capital to​ expand, so the business incorporated. The charter from the state of Georgia authorizes A−Cell to issue 120,000 shares of 8%​, $150 par value cumulative preferred stock and 130,000 shares of $4 par value common stock. During the first​ month, A−Cell completed the following​ transactions:

OCT. 2 Issued 25,000 shares of common stock for a building with a market value of $130,000

6. Issued 650 shares of preferred stock for $160 per share.

9. Issued 18,000 shares of common stock for cash of $90,000

10. Declared a $11,000 cash dividend for stockholders of record on Oct. 20. Use a separate dividends payable account for preferred common stock.

25. Paid the cash dividend

Answer 1

Journal

Date	Account Title and Explanation	Debit	Credit
Oct 2	Building	130,000
	Common stock		100,000
	Paid in capital, in excess of par - Common		30,000
Oct 6	Cash	104,000
	Preferred stock		97,500
	Paid in capital, in excess of par - Preferred		6,500
Oct 9	Cash	90,000
	Common stock		72,000
	Paid in capital, in excess of par - Common		18,000
Oct 10	Retained earnings	11,000
	Common dividend payable		3,200
	Preferred dividend payable		7,800
Oct 25	Common dividend payable	3,200
	Preferred dividend payable	7,800
	Cash		11,000

Dividend declared on preferred stock = Number of preferred shares issue and outstanding x Par value per preferred share x Dividend rate

= 650 x 150 x 8%

= $7,800

Dividend to be paid to common stockholders = Total dividend declared - Dividend to be paid to preferred stockholders

= 11,000 - 7,800

= $3,200

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