Question

Blue Company reported the following amounts in the stockholders' equity section of its December 31, 2016, balance sheet. Preferred stock, 11%, $100 par (10,000 shares authorized, 2,000 shares issued) $200,000 Common stock, $5 par (92,500 shares authorized, 18,500 shares issued) Additional paid-in capital Retained earnings 92,500 120,000 413,000 $825,500 Total During 2017, Blue took part in the following transactions concerning stockholders' equity. 1. Paid the annual 2016 $11 per share dividend on preferred stock and a $2 per share dividend on common stock. These dividends had been declared on December 31 2016 2. Purchased 1,900 shares of its own outstanding common stock for $40 per share. Blue uses the cost method 3. Reissued 600 treasury shares for land valued at $32,100. 4. Issued 530 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 $47 per share 6. Issued the stock dividend. 7. Declared the annual 2017 $11 per share dividend on preferred stock and the $2 per share dividend on common stock. These dividends are payable in 2018.

Answer 1

Treasury Stock : It is the stock which is reacquired by the company and has not been retired

When the treasury stock is issued above the cost at which the treasury stock is acquired, the difference between the issue price of treasury stock and cost of treasury stock is credited Paid in Capital Treasury Stock and treasury stock is credited at cost price

When the treasury stock is issued below the cost at which the treasury stock is acquired, the difference between the issue price and cost of treasury stock is debited Paid in Capital Treasury Stock and treasury stock is credited at cost price

Stock Dividend is the distribution of additional shares each shareholder in an amount proportional their current number of shares. There is no impact on the par value of the share as well as the total shareholders equity. When the Stock dividend is issued, "Retained Earnings' are debited based on the market values of the shares, "Common Stock" is credited by the par value of shares and amount above the par value is credited "Additional paid in Capital"

Transaction Particulars [(2000 x $11) 18500 x$2)1 522,000 [(2000 x S11)+18500 xS21 1 Dividend Payable Opening Common shares outstanding Less: Shares repurchased Add: Treasury stock issued Shares outstanding before stock dividend Add: Stock Dividend 10% Total Shares outstanding after stock dividend 1,900) To record payment of preference and common stock dividend declared on Dec 3 1900 x SA0 576,000 [1900x $40 17,200 1,720 18,920 2 Treasury Stock 576,000 To record purchase of treasury stock 3 Land S32,100 $8,100 IS32100-$24000] 524,000 [600 x $40) Ans Particulars Paid-in-Capital Treasury Stock Treasury Stock To record issue of treasury stock) Preferred Stock, 11%. S100 par (10000 share authorised, 2530 ıssued) Common Stock,$5 par (92500 shares authorised, 20220 issued S253,000 (2000 530) x 5100) 5101, 100 | I( 18500-1720) S192,240 S120000 $72240] 4 Cash 530 x $105 ditional Paid in Capital Additional Paid-in-Capital Preferred Stock Paid-in-Capital Treasury Stock Retained Earnings Less: Treasury Stock Preferred Stock Additional Paid-in-Capital Preferred Stock To record issue of preferred stock) 53,000 530 x $100] 2,650 [530x$5 $8,100 5266,490 5 Retained Earnings $80,840 8,600 572,240 1720 x$47] [1720 x $5) [1720 x S42] 5771,580 Common Stock dividend distributable Additional Paid-in-Capital To record declaration of stock dividend) 11 Common Stock 8,600 Common Stock dividend distributable $8,600 To record issue of Stock Divid [(2000+ 530) x $11] [18920 x 2 12 Preferred Dividend $27,830 $37,840 Common Stock Dividend Dividend Payable To record dividend declaration) 13 Retained Earnings Preferred Dividend Common Stock Dividend 527,830 537,840 o record close of dividends accoun