Question

Oriole Company reported the following amounts in the stockholders' equity section of its December 31, 2019, balance sheet. Preferred stock, 9%, $100 par (10,000 shares authorized, 2,000 shares issued) $200,000 Common stock, $5 par (102,000 shares authorized, 20,400 shares issued) 102,000 Additional paid-in capital 120,000 Retained earnings 495,000 Total $917,000 During 2020, Oriole took part in the following transactions concerning stockholders' equity. 1. Paid the annual 2019 $9 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 1,700 shares of its own outstanding common stock for $41 per share. Oriole uses the cost method. 3. Reissued 600 treasury shares for land valued at $30,400. 4. Issued 480 shares of preferred stock at $105 per share. 5. Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $44 per share. 6. Issued the stock dividend. 7. Declared the annual 2020 $9 per share dividend on preferred stock and the $2 per share dividend on common stock. These dividends are payable in 2021.

Answer 1

Journal Entries:

	Account title and Explanation	Debit	Credit
1	Dividends payable-Common [20,400 x $2]	$40,800
	Dividends payable-Preferred [2,000 x $9]	$18,000
	Cash		$58,800
	[To record payment of cash dividends]
2	Treasury stock [1,700 x $41 cost]	$69,700
	Cash		$69,700
	[To record purchase of own shares]
3	Land	$30,400
	Treasury stock [600 x $41 cost]		$24,600
	Paid in capital in excess from treasury stock		$5,800
	[To record sale of treasury stock in exchange of land]
4	Cash [480 x $105]	$50,400
	Preferred stock [480 x $100 par]		$48,000
	Paid-in capital in excess-Preferred		$2,400
	[To record issuance of preferred stock]
5	Retained earnings [19,300 x 10% x $44]	$84,920
	Common stock dividend distributable [19300 x 10% x $5 par]		$9,650
	Paid-in capital in excess of par - common stock		$75,270
	[To record declaration of stock dividends]
6	Common stock dividend distributable	$9,650
	Common stock		$9,650
	[To record issuance stock dividends]
7	Retained earnings	$64,780
	Dividends payable-Common [21,230 x $2]		$42,460
	Dividends payable-Preferred [2,480 x $9]		$22,320
	[To record declaration of cash dividends]

Calculations:

Outstanding Common shares
Beginning	20400
Treasury stock	-1700
Sale of treasury stock	600
Balance before stock dividend	19300
Stock dividend (19780 x 10%)	1930
Balance after stock dividend	21230
Outstanding Preferred shares
Beginning	2,000
New issue	480
Ending	2,480

Stockholders' equity:

ORIOLE COMPANY
Stockholders' Equity
December 31,2020
Capital stock:
Preferred stock	$248,000
Common stock	$111,650
Total capital stock	$359,650
Additional Paid-in Capital	$203,470
Total paid-in Capital	$563,120
Retained earnings	$345,300
Total paid-in capital and retained earnings	$908,420
(Less): Treasury stock	($45,100)
Total stockholders' Equity	$863,320

Calculations:

Preferred stock
	$200,000
	$48,000
	$248,000
Common stock
	$102,000
	$9,650
	$111,650
Additional paid in capital
	$120,000
	$5,800
	$2,400
	$75,270
	$203,470
Retained Earnings
$84,920	$495,000
$64,780
	$345,300
Treasury stock
$69,700	$24,600
$45,100