Question

1. Swifty Corporation issued 309 shares of $10 par value common stock and 141 shares of $50 par value preferred stock for a lump sum of $18,252. The common stock has a market price of $20 per share, and the preferred stock has a market price of $100 per share.

Prepare the journal entry to record the issuance

2. Oriole Corporation issued 530 shares of $100 par value preferred stock for $64,400.

Prepare Oriole’s journal entry.

3. The common stock of Stellar Inc. is currently selling at $119 per share. The directors wish to reduce the share price and increase share volume prior to a new issue. The per share par value is $10; book value is $68 per share. 9.20 million shares are issued and outstanding.

Prepare the necessary journal entries assuming the following.

(a)		The board votes a 2-for-1 stock split.
(b)		The board votes a 100% stock dividend.

Answer 1

1)

	Debit	Credit
Cash	$ 18,252.00
Common Stock		$    3,090.00
Paid-In Capital-Common		$    2,472.00
Preferred Stock		$    7,050.00
Paid-In Capital-Preferred		$    5,640.00

Working Note

	Shares	Price	Total	Percent (Allocation Basis	Issued Price ($ 18,252)
Common Stock	309.00	$    20.00	$    6,180.00	30.47%	$                             5,562.00
Preferred Stock	141.00	$ 100.00	$ 14,100.00	69.53%	$                           12,690.00
			$ 20,280.00		$                           18,252.00

2)

	Debit	Credit
Cash	$ 64,400.00
Preferred Stock (530*100)		$ 53,000.00
Paid-In Capital-Preferred		$ 11,400.00

3)

a)

No Journal entry is Required. A Memorandum is Required showing the number of shares increased and Decrease of Par value

b)

	Debit	Credit
Retained Earnings	$ 92,000,000.00
Common Stock Dividend Distributable		$ 92,000,000.00
Common Stock Dividend Distributable	$ 92,000,000.00
Common Stock		$ 92,000,000.00