Question

Tamarisk 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, 1,900 shares issued)		$190,000
Common stock, $5 par (108,500 shares authorized, 21,700 shares issued)		108,500
Additional paid-in capital		116,000
Retained earnings		424,000
Total		$838,500

During 2020, Tamarisk 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 1,600 shares of its own outstanding common stock for $39 per share. Tamarisk uses the cost method.
3.		Reissued 800 treasury shares for land valued at $31,600.
4.		Issued 460 shares of preferred stock at $103 per share.
5.		Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $42 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.

1.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 0 for the amounts.)

2.Prepare the December 31, 2020, stockholders’ equity section. Assume 2020 net income was $316,000. (Enter account name only .Do not provide any descriptive information.)

Answer 1

Solution:
1	Journal Entries
Date	Account title and explanation	Debit	Credit
1	Dividend Payable - Preferred Stock (1,900 * $9)	$17,100
	Dividend Payable - Common Stock (21,700 * $2)	$43,400
	Cash		$60,500
	(For Dividend paid on preferred stock and common
	stock)
2	Treasury Stock (1,600 *$39)	$62,400
	Cash		$62,400
	(For Purchase of own stock using cost method)
3	Land	$31,600
	Treasury Stock (800 *$39)		$31,200
	Additional paid-in-capital- Treasury stock		$400
	(For reissue of Treasury Stock)
4	Cash (460 * $103)	$47,380
	Preferred Stock (460 * $100)		$46,000
	Additional paid-in-capital- Preferred stock		$1,380
	(For Issue of preferred stock)
5	Retained Earnings (20,900 * 10% *42)	$87,780
	(21,700 -1600 + 800 = 20,900 outstanding stock)
	Dividend Distributable -common stock (20,900*10%*$5)		$10,450
	Additional paid-in-capital- Common stock		$77,330
	(For declaration of stock dividend)
6	Dividend Distributable -common stock	$10,450
	Common Stock		$10,450
	(For stock dividend Issued)
7	Retained Earnings	$64,520
	Dividend Payable - Preferred Stock ((1600+460) * $9)		$18,540
	Dividend Payable - Common Stock ((20,900+2,090) * $2)		$45,980
	(For Dividend declared)
2	Statement of Stockholder's Equity section
	Tamarisk Company
	Stockholder's equity statement
	December 31,2020
	Particulars	Amount
	Preferred Stock	$206,000
	2,060 shares issued and outstanding @ $100 par
	Common stock
	23,790 shares issed and 22,990 shares outstanding $5 par	$118,950
	Additional Paid - in - Capital	$195,110
	($116,000+ $400 + $1,380 + $77,330= $195,110)
	Total Paid -In - Capital	$520,060
	Retained Earnings	$587,700
	($424,000 + $316,000 - $87,780 - $64,520)
	Total Paid -In - Capital and Retained Earnings	$1,107,760
	Less: Treasury Stock (800 * $39)	$31,200
	Total Stockholder's Equity	$1,076,560
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