Question

Application Problem 11-13A a-b (Part Level Submission) Southwestern Exposure Ltd. began operations on January 2, 2020. During the year, the following transactions affected shareholders' equity: 1. Southwestern Exposure's articles of incorporation authorize the issuance of 1,000,000 common shares, and the issuance of 235,000 preferred shares, which pay an annual dividend of $2.00 per share. 2. A total of 255,000 common shares were issued for $5 a share. 3. A total of 15,000 preferred shares were issued for $13 per share. 4. The full annual dividend on the preferred shares was declared. 5. The dividend on the preferred shares was paid. 6. A dividend of $0.10 per share was declared on the common shares but was not yet paid. 7. The company had net income of $137,000 for the year. (Assume sales of $677,000 and total operating expenses of $540,000.) 8. The dividends on the common shares were paid. 9. The closing entry for the dividends declared accounts was prepared

Answer 1

date	accounts	debit	credit
1.	no entry	0
	no entry		0
2	cash a/c	1,275,000
	........To common stock a/c		1,275,000
	(amount =5*255,000)
3.	cash a/c (13*15,000)	195,000
	.........To preferred stock a/c		195,000
4	preferred dividends declared a/c ($2.00*15,000)	30,000
	..........To preferred dividend payable a/c		30,000
5	preferred dividend payable a/c	30,000
	............To cash a/c	.........	30,000
6	common dividend declared a/c ($0.10*255,000 shares)	25,500
	............To common stock dividend payable a/c		25,500
7	sales a/c	677,000
	.............To income summary	..........	677,000
	income summary	540,000
	.........to operating expenses	.	540,000
	income summary	137,000
	..........To retained earnings	.	137,000
8	common stock dividend payable a/c	25,500
	.........To cash a/c		25,500
9	retained earnings	55,500
	...........To preferred dividend declared		30,000
	...........To common dividend declared		25,500