Question

Problem 10-2B Record equity transactions and indicate the effect on the balance sheet equation (LO10-2, 10-3, 10-4, 10-5)

Nautical has two classes of stock authorized: $10 par preferred, and $1 par value common. As of the beginning of 2021, 100 shares of preferred stock and 1,500 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2021:

March		1		Issue 1,500 additional shares of common stock for $20 per share.
April		1		Issue 200 additional shares of preferred stock for $25 per share.
June		1		Declare a cash dividend on both common and preferred stock of $0.75 per share to all stockholders of record on June 15.
June		30		Pay the cash dividends declared on June 1.
August		1		Purchase 200 shares of common treasury stock for $17 per share.
October		1		Reissue 100 shares of treasury stock purchased on August 1 for $19 per share.

Nautical has the following beginning balances in its stockholders’ equity accounts on January 1, 2021: Preferred Stock, $1,000; Common Stock, $1,500; Additional Paid-in Capital, $18,000; and Retained Earnings, $10,000. Net income for the year ended December 31, 2021, is $6,900.

Required information Problem 10-2B Record equity transactions and indicate the effect on the balance sheet equation (L010-2, 10-3, 10-4, 10-5) [The following information applies to the questions displayed below.) Nautical has two classes of stock authorized: $10 par preferred, and $1 par value common. As of the beginning of 2021, 100 shares of preferred stock and 1,500 shares of common stock have been issued. The following transactions affect stockholders' equity during 2021: March 1 Issue 1,500 additional shares of common stock for $20 per share. April 1 Issue 200 additional shares of preferred stock for $25 per share. June 1 Declare a cash dividend on both common and preferred stock of $0.75 per share to all stockholders of record on June 15. June 30 Pay the cash dividends declared on June 1. August 1 Purchase 200 shares of common treasury stock for $17 per share. October 1 Reissue 100 shares of treasury stock purchased on August 1 for $19 per share. Nautical has the following beginning balances in its stockholders' equity accounts on January 1, 2021: Preferred Stock, $1,000; Common Stock, $1,500; Additional Paid-in Capital, $18,000; and Retained Earnings, $10,000. Net income for the year ended December 31, 2021, is $6,900. < Prev 1 2 of 11 :: Next >

Answer 1

Solution 1:

Journal Entries - Nautical
Date	Particulars	Debit	Credit
01-Mar	Cash Dr (1500*$20)	$30,000
	To Common stock		$1,500
	To Paid in capital in excess of par - Common stock		$28,500
	(To record issue of common stock)
01-Apr	Cash Dr (200*$25)	$5,000
	To Preferred stock (200*$10)		$2,000
	To Paid in capital in excess of par - Preferred stock		$3,000
	(To record issue of preferred stock)
01-Jun	Dividends Dr	$2,475
	To Dividend payable (300*$0.75 + 3000*$0.75)		$2,475
	(To record dividend declared)
30-Jun	Dividend payable Dr	$2,475
	To Cash		$2,475
	(To record dividend payment)
01-Aug	Treasury stock Dr (200*$17)	$3,400
	To Cash		$3,400
	(To record purchase of treasury stock)
01-Oct	Cash Dr (100*$19)	$1,900
	To Treasury stock		$1,700
	To Additional paid in capital		$200
	(To record reissue of treasury stock)

Solution 2:

Transaction	Total Assets	Total Liabilities	Total Stockholders' Equity
Issue Common stock	Increase		Increase
Issue Preferred Stock	Increase		Increase
Declare Cash Dividend		Increase	Decrease
Pay Cash Dividend	Decrease	Decrease
Purchase Treasury stock	Decrease		Decrease
Reissue Treasury stock	Increase		Increase