Question

Flint Corporation’s charter authorizes the issuance of 1 million common shares and 450,000 preferred shares that have a dividend rate of $6 per share per year. The following transactions involving share issues were completed. Assume that Flint follows IFRS and that each transaction is independent of the others.

1.		Issued 4,500 common shares for machinery. The machinery had been appraised at $74,700, and the seller’s carrying amount was $58,600. The common shares’ most recent market price is $22 a share.
2.		The board of directors declared a $10 dividend on both the 18,000 outstanding common shares and the 42,000 outstanding preferred shares.
3.		Issued 8,400 common shares and 1,200 preferred shares for a lump sum of $201,000. The common shares had been selling at $13 and the preferred at $79.
4.		Issued 2,100 common shares and 135 preferred shares for furniture. The common shares had a fair value of $16 per share and the furniture was appraised at $39,000.

Prepare the journal entries to record the transactions.

Answer 1

Transaction	General Journal	Debit	Credit
1	Machinery	$74,700
	Common Stock		$74,700
	Note: The machinery cannot be recorded at a cost higher than its fair value
2	Dividend	$432,000
	Dividends Payable		$432,000
	Working
	Dividend to preferred: $6 X 42,000 shares		$252,000
	Dividend to common: $10 X 18,000 shares		$180,000
			$432,000
3	Cash	$201,000
	Common Stock		$107,594
	Preferred Stock		$93,406
	Working
	Fair value of common (8,400 x $13)	$109,200
	Fair value of preferred (1,200 x $79)	$94,800
	Aggregate	$204,000
	Allocation
	Common Stock ($201,000 x $109,200/$204,000)	$107,594
	Preferred Stock ($201,000 x $94,800/$204,000)	$93,406
		$201,000
4	Furniture and Fixtures	$39,000
	Common Stock (2,100 x $16)		$33,600
	Preferred Stock		$5,400	Balance
	Note: using the residual value method