Question

Question 4 Nash Company reported the following amounts in the stockholders’ equity section of its December 31, 2019, balance sheet. Preferred stock, 10%, $100 par (10,000 shares authorized, 2,000 shares issued) $200,000 Common stock, $5 par (108,000 shares authorized, 21,600 shares issued) 108,000 Additional paid-in capital 119,000 Retained earnings 419,000    Total $846,000 During 2020, Nash took part in the following transactions concerning stockholders’ equity. 1. Paid the annual 2019 $10 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 1,700 shares of its own outstanding common stock for $41 per share. Nash uses the cost method. 3. Reissued 600 treasury shares for land valued at $27,800. 4. Issued 480 shares of preferred stock at $104 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 $10 per share dividend on preferred stock and the $2 per share dividend on common stock. These dividends are payable in 2021.

Your answer is partially correct. Try again. 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.) Prepare the December 31, 2020, stockholders’ equity section. Assume 2020 net income was $323,000.

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Answer 1

Journal Entries:

	Account title and Explanation	Debit	Credit
1	Dividend payable - preferred (2,000 x $10)	$20,000
	Dividend payable - Common (21,600 x $2)	$43,200
	Cash		$63,200
	[To record payment of cash dividends]
2	Treasury stock (1,700 x $41)	$69,700
	Cash		$69,700
	[To record purchase of own shares]
3	Land	$27,800
	Treasury stock (600 x $41 cost )		$24,600
	Additional paid-in capital from treasury		$3,200
	[To record sale of treasury stock for land]
4	Cash (480 x $104)	$49,920
	Preferred stock (480 x $100)		$48,000
	Additional paid in capital-preferred		$1,920
	[To record issuance of preferred stock]
5	Retained earnings [2,050 x $42]	$86,100
	Common stock dividend distributable [2,050 x $5 par]		$10,250
	Additional paid in capital-common		$75,850
	[To record declaration of stock dividend]
6	Common stock dividend distributable	$10,250
	Common stock		$10,250
	[To record issuance of stock dividend]
7	Retained Earnings	$69,900
	Dividend payable - preferred (2,480 x $10)		$24,800
	Dividend payable - Common (22,550 x $2)		$45,100
	[To record declaration of dividends]

Calculations:

Common stock outstanding shares
Beginning	21,600
Treasury stock	-1,700
Sale of treasury stock	600
Balance before stock dividend	20,500
Stock dividend (20,500 x 10%)	2,050
Balance after stock dividend	22,550

Preferred stock outstanding shares
Beginning	2,000
New issue	480
Total	2,480

Stockholders' Equity Section:

Nash Company
Balance Sheet (Partial)
December 31, 2020
Stockholders' equity:
Paid-in capital:
Capital stock:
Preferred Stock	$248,000
Common Stock	$118,250
Total Capital stock		$366,250
Additional Capital		$199,970
Total Paid-in Capital		$199,970
Retained earnings		$586,000
Total paid-in capital and Retained earnings		$785,970
(Less): Treasury stock		($45,100)
Total stockholders' Equity		$740,870

Calculations:

	Preferred stock	Common stock	Additional paid in capital	Retained Earnings	Treasury Stock
Beginning balance	$200,000	$108,000	$119,000	$419,000
1
2					$69,700
3			$3,200		($24,600)
4	$48,000		$1,920
5			$75,850	($86,100)
6		$10,250
7				($69,900)
Net income				$323,000
Ending Balance	$248,000	$118,250	$199,970	$586,000	$45,100