Question

Martinez Company reported the following amounts in the stockholders' equity section of its December 31, 2019, balance sheet. Preferred stock, 10%, $100 par (10,000 shares authorized, 1,800 shares issued) $180,000 Common stock, $5 par (93,000 shares authorized, 18,600 shares issued) 93,000 Additional paid-in capital 130,000 Retained earnings 467,000 Total $870,000 During 2020, Martinez took part in the following transactions concerning stockholders' equity. 1. Paid the annual 2019 $10 per share dividend on preferred stock and a $2 per share dividend on common stock. These dividends had been declared on December 31, 2019. 2. Purchased 1,500 shares of its own outstanding common stock for $41 per share. Martinez uses the cost method. 3. Reissued 800 treasury shares for land valued at $35,600. 4. Issued 550 shares of preferred stock at $104 per share. 5. Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $46 per share. 6. Issued the stock dividend. 7. Declared the annual 2020 $10 per share dividend on preferred stock and the $2 per share dividend on common stock. These dividends are payable in 2021. Prepare journal entries to record the transactions described above. (Credit account titles are automatically indented when amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter o for the amounts.) Debit Credit No. Account Titles and Explanation 1. O 5. 6.

Answer 1

Martinez Company Debit Credit Calculation Date Account Preferred Dividends Payable =1,800*10 18,000 Common Dividends Payable =18,600*2 37,200 Cash 55,200 =1,500*41 Treasury Stock 61,500 Cash 61,500 Land 35,600 Treasury Stock Additional Paid-in Capital 32,800 =800*41 2,800 Cash =550*104 4 57,200 Preferred Stock 55,000 =550*100 Additional Paid-in Capital 2,200 Stock Dividends =1,790*46 82,340 Common Stock Dividend Distributable 8,950 =1,790*5 Additional Paid-in Capital 73,390 Common Stock Dividend Distributable 8,950 Common Stock 8,950 Cash Dividends 62,880 Preferred Dividends Payable 23,500 =(1,800+550)*10 Common Dividends Payable 39,380 Closing entries 31-Dec Income Summary 327,000 Retained Earnings 327,000 31-Dec Retained Earnings 145,220 Cash Dividends 62,880 Stock Dividends 82,340 Workings Cash Dividends Opening Common Shares Treasury Stock purchased 18,600 (1,500) Treasury Stock reissued Subtotal 800 17,900 10% Stock Dividends 1,790 =17,900*10% Number of Common Shares Issued 19,690 Cash Dividend per share Cash Dividend Declared 39,380 =19,690*2 5.

Martinez Company TAccounts Date Date Date Additional Paid-in Capital Debit Credit Date Debit Credit Date Debit Credit Debit Credit Date Date Date Retained Earnings 31-Dec $82,340 op bal Preferred Stock Common Stock Op bal Op bal $ 180,000 $ 55,000 Op bal 2$ $467,000 93,000 130,000 31-Dec $62,880 8,950 31-Dec $327,000 4 6. 3 2,800 2$ 4 2,200 73,390 $ 648,780 $ 101,950 Bal. $ 235,000 $ 208,390 Bal. Bal. Bal. Treasury Stock 2$ Stock Dividends Cash Dividends Common Stock Dividend Distributable $ 32,800 $ 62,880 $ 8,950 $ 8,950 82,340 2 61,500 5 $ 28,700 $ 62,880 2$ Bal. Bal. Bal. Bal. 82,340

Martinez Company Partial Balance Sheet As of December 31, 2019 Stockholders Equity Preferred Stock 235,000 Common Stock 101,950 Total Capital Stock Additional Paid in Capital 336,950 208,390 Total Paid in Capital 545,340 Retained Earnings 648,780 Total Paid in Capital & Retained Earnings 1,194,120 Less: Treasury Stock Total Stockholders Equity (28,700) 1,165,420