Question

Major League Apparel has two classes of stock authorized: 4%, $10 par preferred, and $1 par value common. The following transactions affect stockholders' equity during 2021, its first year of operations: January 2 Issue 120,000 shares of common stock for $62 per share. February 14 Issue 52,000 shares of preferred stock for $13 per share. May 8 Purchase 12,000 shares of its own common stock for $52 per share. May 31 Resell 6,000 shares of treasury stock for $57 per share. December 1 Declare a cash dividend on its common stock of $0.60 per share and a $20,800 (4% of par value) cash dividend on its preferred stock payable to all stockholders of record on December 15. The dividend is payable on December 30. (Hint: Dividends are not paid on treasury stock.) December 30 Pay the cash dividends declared on December 1. Problem 10-6A Part 1 Required: 1. Record each of these transactions. (If no entry is required for a particular transaction, select "No Journal Entry Required" in the first account field.) View transaction list Journal entry worksheet 1 2 3 4 5 6 7 Record the issuance of 120,000 shares of common stock for $62 per share. Note: Enter debits before credits. Date General Journal Debit Credit January 02, 2021 |

7 entries required:

1. Record the issuance of 120,000 shares of common stock for $62 per share.

2. Record the issuance of 52,000 shares of preferred stock for $13 per share.

3. Record the purchase of 12,000 shares of its own common stock for $52 per share.

4. Record the resell of 6,000 shares of treasury stock for $57 per share.

5. Record the declaration of a cash dividend on its common stock of $0.60 per share and a $20,800 (4% of par value) cash dividend on its preferred stock payable to all stockholders. The dividend is payable on December 30 (Hint; dividends are not paid on treasury stock).

6. Record the entry on December 15

7. Record the cash dividends declared on December 1.

Answer 1

Journal entry

No	Account and explanation	Debit	Credit
1	Cash (120000*62)	7440000
	Common Stock		120000
	Paid in capital in excess of par value-Common stock		7320000
2	cash	676000
	Preferred stock (52000*10)		520000
	Paid in capital in excess of par value-Preferred stock		156000
3	Treasury Stock (12000*52)	624000
	Cash		624000
4	Cash (6000*57)	342000
	Treasury stock (6000*52)		312000
	Paid in capital from sale of treasury stock		30000
5	Cash dividend (114000*.60+20800)	89200
	Common Dividend payable		68400
	Preferred dividend payable		20800
6	No entry
7	Common Dividend payable	68400
	Preferred dividend payable	20800
	Cash		89200