Question

PROBLEM 1. The stockholders’ equity section of Dobroskey Corporation’s balance sheet as of December 31, 2019 is as follows:

  Stockholders’ Equity

- Preferred Stock, 4% $100 par value, 100,000 shares authorized and 5000 shares issued and outstanding   = $500,000

- Common stock, $10 par value; authorized, 2,000,000 shares auth; issued and outstanding 60,000 shares   = $600,000

- Paid-in capital in excess of par  =  $850,000

- Retained earnings  =  $4,000,000

The following events occurred during 2020:

- Jan. 5:    20,000 shares of authorized and unissued common stock were sold for $19 per share.

- Jan. 16:   Declared a cash dividend of 10 cents per share on the common stock, payable February 9 to stockholders of record on February 5.

- Feb. 9: Paid the dividend declared on Jan. 16

- Feb. 20:   30,000 shares of authorized and unissued common stock were sold for $22 per share.

- Mar. 1:   A 10% stock dividend was declared . Market value per share is currently $24.

- Apr. 1: The common stock dividend that was declared on March 1 was issued.

- Jul. 1:     2,000 shares of Treasury Stock was purchased at $30 per share.

- Sept. 1:   1,000 shares of Treasury Stock were sold for $32 per share.

- Dec. 31:   The preferred dividend was declared and a common dividend of 50 cents a share was declared.

- Dec. 31: Income for the year was $575,000

Instructions

1. Prepare all journal entries necessary for each of the transactions in 2020.
2. Post transactions to T-accounts
3. Prepare the 12/31/2020 Stockholder equity section of the balance sheet.
4. How many shares of common stock would be outstanding if a two for one stock split was declared on December 30th?

Answer 1

Answer 1 and 2

XIA 5 2020-09(3) SEP.xlsx - Microsoft Excel ? X FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW DEVELOPER Sign in F28 X f А B с D E F G H K 2 3 Credit 4 Answer 1 Date General journal Debit Jan 5 Cash (20000*19) 380,000 Paid in capital excess of par value (20000*(19-10)) Common stock (20000*10) (To record issue of common stock.)(Total shares issued = 60000+20000=80000) 5 6 180,000 200,000 Answer 2 Common stock Jan 1. Balance Jan 5 Feb 20 Apr 1 Dec 31. Balance $ 600,000 $ 200,000 $ 300,000 $ 110,000 $ 1,210,000 7 8 9 8,000 10 Jan 16 Cash Dividends (This is closed to retained earnings) Dividend Payable - Common (To record Dividend declared.) (80000*0.10) 8,000 11 12 Paid in capital excess of par value Jan 1. Balance Jan 5 Feb 20 Mar 1 Dec 31. Balance 13 8,000 $ 850,000 $ 180,000 $360,000 $ 154,000 $ 1,544,000 Feb 9 Dividend Payable - Common Cash (To record Dividend paid.) 14 8,000 15 16 17 18 660,000 Feb 20 Cash (30000*22) Paid in capital excess of par value (30000* (22-10)) Common stock (30000*10) (To record issue of common stock.) (Total shares issued = 80000+30000=110000) 360,000 300,000 Common stock dividend distributable $ 110,000 Mar 1 19 Apr 1 $ 110,000 20 21 Dec 31. Balance $ 0 22 23 Mar 1 Stock dividends (This is closed to retained earnings) (11000*24) 264,000 Paid in capital excess of par value (11000*(24-10)) 154,000 Common stock dividend distributable (11000*10) 110,000 (To record Stock Dividend Declared.) (Stock dividends = 110000*10%=11000) (110000+11000=121000) Preffered stock Jan 1. Balance $ 500,000 24 25 26 110,000 27 28 110,000 Apr 1 Common stock dividend distributable Common stock (To record Stock Dividend Distributed.) Sheet14 Sheet15 Sheet16 Sheet17 Retained Earnings Dec 31 (close dividends) $352,000 Jan 1. Balance $ 4,000,000 |(8000+264000+20000+60000) Dec 31 (close net inc $ 575,000 Activate windows Go to Settings to activate Windows, 29 Sheet18 Sheet19 Sheet20 Sheet21 Sheet22 READY + + 100% 03:44 1 Search the web and Windows O ENG US 25-09-20

XIA 5 2020-09(3) SEP.xlsx - Microsoft Excel ? X FILE HOME INSERT PAGE LAYOUT FORMULAS DATA REVIEW VIEW DEVELOPER Sign in F20 X f А B E F G H J K 20 с D (To record issue of common stock.) (Total shares issued = 80000+30000=110000) 21 Dec 31. Balance $ 0 22 23 24 Mar 1 Stock dividends (This is closed to retained earnings) (11000*24) 264,000 Paid in capital excess of par value (11000* (24-10)) 154,000 Common stock dividend distributable (11000*10) 110,000 (To record Stock Dividend Declared.) (Stock dividends = 110000*10%=11000) (110000+11000=121000) Preffered stock Jan 1. Balance $ 500,000 25 26 27 110,000 Apr 1 Common stock dividend distributable Common stock (To record Stock Dividend Distributed.) Retained Earnings Dec 31 (close dividends) $352,000 Jan 1. Balance $ 4,000,000 (8000+264000+20000+60000) Dec 31 (close net inc $ 575,000 28 110,000 29 30 31 32 60,000 Dec 31. Balance $ 4,223,000 July 1 Treasury Stock Cash (To record purchased its own stock.) (2000*30) 60,000 33 34 35 36 Jan 1. Balance July 1 Treasury stock $ 0 $ 60,000 Sep 1 32,000 $ 30,000 Sepi Cash (1000*32) Paid in capital from treasury stock transactions (1000*(32-30)) Treasury stock (1000*30) (To record treasury stock sold.) 2,000 30,000 37 Dec 31. Balance $ 30,000 38 39 40 41 Dec 31 Dividend Payable - Preferred (This is closed to retained earnings) (50 20,000 Dividend Payable - Common (This is closed to retained earnings) (12 60,000 Cash 80,000 (To record Dividend declared.) (Common outstanding shares = 121000-(2000-1000)=120000 42 Paid in capital from treasury stock transactions Jan 1. Balance $ Sep 1 $ Dec 31. Balance $ 0 0 2,000 43 44 2,000 45 575,000 575,000 46 47 Dec 31 Income summary Retained earnings (To record close the net income) Sheet14 Sheet15 Sheet16 Sheet17 Activate Windows Go to Settings to activate Windows Sheet18 Sheet19 Sheet20 Sheet21 Sheet22 + READY + + 100% 03:44 i Search the web and Windows O ENG US 25-09-20

Answer 3

Company name
Balance sheet (Equity section)
December 31, 2020
Stockholder's equity
Preferred stock: 4% $100 par value, 100,000 shares authorized and 5000 shares issued and outstanding		$         500,000
Common stock: $10 par value, 2000,000 shares authorized, 121000 shares issued		$     1,210,000
Total capital stock		$     1,710,000
Additional paid-in-capital:
In excess of par- common	$ 1,544,000
From treasury stock	$          2,000
		$     1,546,000
Total paid in capital		$     3,256,000
Retained earnings		$     4,223,000
Total paid-in-capital and retained earnings		$     7,479,000
Less: Cost of treasury stock (1000 shares)		$         (30,000)
Total stockholders equity		$     7,449,000

Answer 4

Number of common shares outstanings before stock split (121000-1000)	120,000
Multiply: two for one stock split	2
Number of common shares outstanings after stock split	240,000