Question

Problem 11-02A The stockholders' equity accounts of Monty Corp. on January 1, 2022, were as follows. Preferred Stock (7%, $100 par noncumulative, 11,500 shares authorized) Common Stock ($4 stated value, 690,000 shares authorized) Paid-in Capital in Excess of Par Value-Preferred Stock Paid-in Capital in Excess of Stated Value-Common Stock Retained Earnings Treasury Stock (11,500 common shares) $690,000 2,300,000 34,500 1,104,000 1,582,400 92,000 During 2022, the corporation had the following transactions and events pertaining to its stockholders' equity. Feb. 1 Issued 11,500 shares of common stock for $69,000. Mar. 20 Purchased 2,300 additional shares of common treasury stock at $7 per share. Oct. 1 Declared a 7% cash dividend on preferred stock, payable November 1. Nov. 1 Paid the dividend declared on October 1. Dec. 1 Declared a $0.50 per share cash dividend to common stockholders of record on December 15, payable December 31, 2022. Dec. 31 Determined that net income for the year was $644,000. Paid the dividend declared on December 1.

Answer 1

Journal entries:

Date	Account title and explanation	Debit	Credit
Feb.1	Cash	$69,000
	Common stock [11,500 x $4]		$46,000
	Paid-in capital in excess of stated value- common stock		$23,000
	[Issuance of common stock]
Mar.20	Treasury stock   [2,300 x $7]	$16,100
	Cash		$16,100
	[Repurchase of own shares]
Oct.1	Cash Dividends   [690,000 X 7%]	$48,300
	Dividends payable-preferred		$48,300
	[Declaration of cash dividends]
Nov.1	Dividends payable-preferred	$48,300
	Cash		$48,300
	[Payment of cash dividends]
Dec.1	Cash Dividends [572,700 x $0.50]	$286,350
	Dividends payable-common		$286,350
	[Declaration of cash dividends]
Dec.31	Income summary	$644,000
	Retained earnings		$644,000
	[To record net income]
Dec.31	Retained earnings	$334,650
	Cash Dividends [48,300+286,350]		$334,650
	[To close cash dividends]
Dec.31	Dividends payable-common	$286,350
	Cash		$286,350
	[To record payment of cash dividends payable]

*Outstanding Common shares
Beginning ($2,300,000/$4)	575,000
New issue	11,500
Treasury stock:
Beginning	-11,500
Mar.20	-2,300
Balance	572,700

T-Accounts:

Preferred stock
		Beg.	$690,000
		End.	$690,000
Common stock
		Beg.	$2,300,000
		Feb.1	$46,000
		End.	$2,346,000
Paid-in capital in excess of par value-Preferred stock
		Beg.	$34,500
		End.	$34,500
Paid-in capital in excess of stated value-common stock
		Beg.	$1,104,000
		Feb.1	$23,000
		End.	$1,127,000
Retained earnings
Dec.31	$334,650	Beg.	$1,582,400
		Dec.31	$644,000
		End.	$1,891,750

Balance Sheet:

MONTY CORP.
Partial Balance Sheet
December 31,2022
Stockholder's equity:
Paid-in capital
Capital stock
Preferred stock	$690,000
Common stock	$2,346,000
Total capital stock		$3,036,000
Additional paid-in capital
In excess of par value-preferred stock	$34,500
In excess of stated value-common stock	$1,127,000
Total additional paid-in capital		$1,161,500
Total Paid-in capital		$4,197,500
Retained earnings		$1,891,750
Total paid-in capital and retained earnings		$6,089,250
(less): Treasury stock		($108,100)
Total stockholder's equity		$5,981,150