Question

Sun Corporation received a charter that authorized the issuance of 103,000 shares of $6 par common stock and 19,000 shares of $125 par, 4 percent cumulative preferred stock. Sun Corporation completed the following transactions during its first two years of operation:

Year 1

Jan.		5		Sold 15,450 shares of the $6 par common stock for $8 per share.
		12		Sold 1,900 shares of the 4 percent preferred stock for $135 per share.
Apr.		5		Sold 20,600 shares of the $6 par common stock for $10 per share.
Dec.		31		During the year, earned $304,800 in cash revenue and paid $243,200 for cash operating expenses.
		31		Declared the cash dividend on the outstanding shares of preferred stock for Year 1. The dividend will be paid on February 15 to stockholders of record on January 10, Year 2.
		31		Closed the revenue, expense, and dividend accounts to the retained earnings account.

Year 2

Feb.		15		Paid the cash dividend declared on December 31, Year 1.
Mar.		3		Sold 2,850 shares of the $125 par preferred stock for $145 per share.
May		5		Purchased 550 shares of the common stock as treasury stock at $12 per share.
Dec.		31		During the year, earned $249,200 in cash revenues and paid $179,300 for cash operating expenses.
		31		Declared the annual dividend on the preferred stock and a $0.50 per share dividend on the common stock.
		31		Closed revenue, expense, and dividend accounts to the retained earnings account.

a. Prepare journal entries for these transactions for Year 1 and Year 2 and post them to T-accounts. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field. Round your intermediate calculations and final answer to the nearest dollar amount. Select "12/31 cl." for all the closing entries.)

Answer 1

Debit Credit Calculation Sun Corporation Date Account Year 1 5-Jan Cash Common Stock Paid in Capital in Excess of Par-Common Stock 123,600 =15,450*8 =15,450*6 92,700 30,900 256,500 12-Jan Cash Preferred Stock Paid in Capital in Excess of Par-Preferred Stock =1,900*135 =1,900*125 237,500 19,000 206,000 5-Apr Cash Common Stock Paid in Capital in Excess of Par-Common Stock =20,600*10 =20,600*6 123,600 82,400 304,800 31-Dec Cash Service Revenue 304,800 243,200 31-Dec Operating expenses Cash 243,200 9,500 =237,500*4% 31-Dec Dividends Dividends Payable 9,500 304,800 31-Dec Service Revenue 12/31 cl. Retained Earnings 304,800 243,200 31-Dec Retained Earnings 12/31 cl. Operating expenses 243,200 9,500 31-Dec Retained Earnings 12/31 cl. Dividends 9,500 Year 2 15-Feb Dividends Payable Cash 9,500 9,500 413,250 3-Mar Cash Preferred Stock Paid in Capital in Excess of Par-Preferred Stock =2,850*145 =2,850*125 356,250 57,000 6,600 =550*12 5-May Treasury Stock-Common Cash 6,600 249,200 31-Dec Cash Service Revenue 249,200 179,300 31-Dec Operating expenses Cash 179,300 41,500 Workings below 31-Dec Dividends Dividends Payable 41,500 249,200 31-Dec Service Revenue 12/31 cl. Retained Earnings 249,200 179,300 31-Dec Retained Earnings 12/31 cl. Operating expenses 179,300 41,500 31-Dec Retained Earnings 12/31 cl. Dividends 41,500 Workings 12-Jan Preferred Stock issued 3-Mar Preferred Stock issued Total Preferred Stock @ Par Value Dividend % Preferred Dividends 237,500 356,250 593,750 4% 23,750 =593,750*4% 5-Jan Common Stock issued 5-Apr Common Stock issued 5-May Treasury Stock purchased Total Number of Common Shares Dividend per share Common Dividends Total Dividends 15,450 20,600 (550) 35,500 0.50 17,750 41,500 =23,750+17,750

Date Debit Date Credit Date Debit Date Credit Date Debit Date Credit Sun Corporation T Accounts Date Debit Date Credit YEAR 1 Cash 5-Jan $ 123,600 31-Dec $243,200 12-Jan $ 256,500 5-Apr $ 206,000 31-Dec $ 304,800 Dividends Payable 31-Dec $ 9,500 Retained Earnings $243,200 12/31 cl. $ 9,500 $ 304,800 Dividends 31-Dec $ 9,500 12/31 cl. $ 12/31 cl. 12/31 cl. 9,500 $ 647,700 Preferred Stock 12-Jan $ 237,500 Bal. $ 9,500 Paid in Capital in Excess of Par-Stock 12-Jan $ 19,000 Bal. $ 52,100 Common Stock 5-Jan $ 92,700 5-Apr $123,600 Bal. $ Paid in Capital in Excess of Par-Common 5-Jan $ 30,900 5-Apr $ 82,400 $ 19,000 I. $ 216,300 Bal. $113,300 Bal. $ 237,500 Service Revenue $ 304,800 31-Dec $304,800 Bal. Operating expenses 31-Dec $243,200 12/31 cl. 12/31 cl. $243,200 Bal. $ . Bal. $ .

YEAR 2 Cash Op bal $ 647,700 3-Mar $ 413,250 31-Dec $ 249,200 Dividends Payable 15-Feb $ 9,500 Op bal $ 9,500 12/31 cl. 31-Dec $ 41,500 12/31 cl. Retained Earnings $179,300 Op bal $ 41,500 12/31 cl. Dividends 31-Dec $ 41,500 12/31 cl. 15-Feb $ 9,500 5-May $ 6,600 31-Dec $ 179,300 $ 41,500 $ 52,100 $249,200 Bal. $ 80,500 $1,114,750 Preferred Stock Op bal $237,500 3-Mar $ 356,250 Bal. $ 41,500 Paid in Capital in Excess of Par-Stock Op bal $ 19,000 3-Mar $ 57,000 Bal. Common Stock Op bal Bal. $ - Paid in Capital in Excess of Par-Common Op bal $113,300 $216,300 $216,300 Bal. $ 113,300 1. $593,750 Treasury Stock-Common 5-May $ 6,600 Bal. $ 76,000 Service Revenue $249,200 31-Dec $249,200 Bal. Operating expenses 31-Dec $179,300 12/31 cl. 12/31 cl. $179,300 Bal. $ 6,600 Bal. $ - Bal. $ -