Question

On December 31, 2021, Sunland Company had 1,280,000 shares of $6 par common stock issued and outstanding. At December 31, 2021, stockholders' equity had the amounts listed here. Common Stock Additional Paid-in Capital Retained Earnings $7,680,000 1,790,000 1.280,000 Transactions during 2022 and other information related to stockholders' equity accounts were as follows. 1. On January 10, issued at $113 per share 126,000 shares of $103 par value, 9% cumulative preferred stock. 2. On February 8, reacquired 12,500 shares of its common stock for $14 per share. 3. On May 9, declared the yearly cash dividend on preferred stock, payable June 10, to stockholders of record on May 31. 4. On June 8, declared a cash dividend of $1.50 per share on the common stock outstanding, payable on July 10, to stockholders of record on July 1. 5. Net income for 2022 was $3,662,000. Record the journal entries that are required for items 1-5 above. (Record entries in the order displayed in the problem statement. Credit account titles are automatically indented Date Account Titles and Explanation Debit Credit (To close net income) (To close cash dividends)

Answer 1

Solution:

Journal Entries - Sunland Company
Date	Particulars	Debit	Credit
10-Jan	Cash Dr (126000*$113)	$1,42,38,000
	To preferred stock		$1,29,78,000
	To Paid in capital in excess of par - Preferred stock		$12,60,000
08-Feb	Treasury stock Dr (12500*$14)	$1,75,000
	To Cash		$1,75,000
09-May	Dividends Dr	$11,68,020
	To Dividend payable - preferred (126000*$103*9%)		$11,68,020
08-Jun	Dividends Dr	$19,01,250
	To Dividend payable -Common [(1280000-12500)*$1.50))		$19,01,250
10-Jun	Dividned payable - Preferred	$11,68,020
	To Cash		$11,68,020
10-Jul	Dividned payable - Common	$19,01,250
	To Cash		$19,01,250
31-Dec	Income Summary	$36,62,000
	To Retained earnings		$36,62,000
31-Dec	Retained earnings	$30,69,270
	To Dividends		$30,69,270