Question

On January 5, 2020, Whispering Corporation received a charter granting the right to issue 5,300 shares of $100 par value, 8% cumulative and nonparticipating preferred stock, and 46,700 shares of $10 par value common stock. It then completed these transactions. Jan. 11 Issued 20,000 shares of common stock at $17 per share. Feb. 1 Issued to Sanchez Corp. 4,400 shares of preferred stock for the following assets: equipment with a fair value of $47,300; a factory building with a fair value of $161,000; and land with an appraised value of $253,000. July 29 Purchased 2,000 shares of common stock at $16 per share. (Use cost method.) Aug. 10 Sold the 2,000 treasury shares at $14 per share. Dec. 31 Declared a $0.50 per share cash dividend on the common stock and declared the preferred dividend. Dec. 31 Closed the Income Summary account. There was a $169,700 net income.

Record the journal entries for the transactions listed above. Prepare the stockholders’ equity section of Whispering Corporation’s balance sheet as of December 31, 2020. (Enter account name only and do not provide descriptive information.)

Answer 1

	Journal Entries to record the transactions:-
	Date	Particulars	Debit	Credit
	Jan. 11	Bank	3,40,000
		To Common stock		2,00,000
		To Paid in capital in excess of par- Common Stock		1,40,000
	Feb.1	Equipment	47,300
		Factory Building	1,61,000
		Land	2,53,000
		To Preferred Stock		4,40,000
		To Paid in capital in excess of par- Preferred Stock		21,300
	Jul.29	Treasury Stock	32,000
		To Bank		32,000
		(2,000 x 16)
	Aug. 10	Bank	28,000
		Paid in capital from Treasury Stock	4,000
		To Treasury Stock		32,000
	Dec. 31	Retained Earnings	10,000
		To Dividend Payable -Common Stock		10,000
		( 20,000 x 0.50 )
	Dec. 31	Retained Earnings	35,200
		To Dividend Payable -Preferred Stock		35,200
		( 440,000 x 8% )
		Stock holder's equity Section:-	Amount in $
		Paid in Capital
		Common Stock	2,00,000
		Preferred Stock	4,40,000
		Paid in capital in excess of par- Common Stock	1,40,000
		Paid in capital in excess of par- preferred Stock	21,300
		Paid in capital from treasury Stock	-4,000
		Total Paid in capital (A )	7,97,300
		Retained Earnings- Current year	1,69,700
		Less: Dividend Payable-Common Stock	-10,000
		Less: Dividend Payable-preferred Stock	-35,200
		Net Retained Earnings (B)	1,24,500
		Total Stock Holder's Equity (A+B)	9,21,800