Question

Major League Apparel has two classes of stock authorized: 6%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during 2021, its first year of operations: January 2 Issue 110,000 shares of common stock for $70 per share. February 14 Issue 60,000 shares of preferred stock for $12 per share. May 8 Purchase 11,000 shares of its own common stock for $60 per share. May 31 Resell 5,500 shares of treasury stock for $65 per share. December 1 Declare a cash dividend on its common stock of $0.25 per share and a $36,000 (6% 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. Required: 1. Record each of these transactions. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)

Answer 1

No.	Date	General Journal	Debit	Credit
1	January 02, 2021	Cash                                                       [Total cash received = 110,000 shares x $70]	$7,700,000
		Common Stock                                    [Total par value = 110,000 shares x $1]		$110,000
		Additional Paid-in capital                  [110,000 shares x ($70 - $1)]		$7,590,000
2	February 14, 2021	Cash                                                       [Total cash received = 60,000 shares x $12]	$720,000
		Preferred Stock                                   [Total par value = 60,000 shares x $10]		$600,000
		Additional Paid-in capital                  [60,000 shares x ($12 - $10)]		$120,000
3	May 08, 2021	Treasury stock                                        [11,000 shares x $60]	$660,000
		Cash		$660,000
4	May 31, 2021	Cash                                                       [Total cash received = 5,500 shares x $65]	$357,500
`		Treasury Stock                                    [Cost = 5,500 shares x $60]		$330,000
		Additional Paid-in capital                  [Gain = 5,500 shares x ($65 - $60)]		$27,500
5	May 08, 2021	Dividends                                             [Refer working note 1]	$62,125
		Dividend Payable		$62,125
6	December 15, 2021	No Journal Entry Required
7	December 31, 2021	Dividend Payable	$62,125
		Cash		$62,125

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Working note 1- Calculation of total dividend
Outstanding common shares                           [Refer working note 2]     (a)	104,500
Cash dividend per common share outstanding                                         (b)	0.25
Cash dividend on Common Shares                                                        (c = a x b)	26,125
Add: Dividend to preference shareholders                                              (d)	36,000
Total dividend                                                                                          (c + d)	62,125
Working note 2 - Calculation of Outstanding common shares as of June 15
Number of shares of common stock at the beginning of the year	0
Add: Additional shares issued	110,000
Total common shares issued	110,000
Less: Treasury stock   [11,000 shares - 5,500 shares]	5,500
Outstanding common shares	104,500