Recording and reporting stock transactions and cash dividends across two accounting cycles
Lane Corporation was authorized to issue 100,000 shares of $5 par common stock and 20,000 shares of $100 par, 6 percent, cumulative preferred stock. Lane Corporation completed the following transactions during its first two years of operation:
2011
Jan. | 2 | Issued 15,000 shares of $5 par common stock for $7 per share. |
| 15 | Issued 2,000 shares of $100 par preferred stock for $110 per share. |
Feb. | 14 | Issued 20.,000 shares of $5 par common stock for S9 per share. |
Dec. | 31 | During the year, earned $310,000 of cash revenues and paid $240,000 of cash operating expenses. |
| 31 | Declared the cash dividend on outstanding shares of preferred stock for 2011. The dividend will be paid on January 31 to stockholders of record on January 15, 2012. |
| 31 | Closed revenue, expense, and dividend accounts to the retained earnings account. |
2012
Jan. | 31 | Paid the cash dividend declared on December 31, 2011. |
Mar. | 1 | Issued 3,000 shares of $100 par preferred stock for $120 per share. |
June | 1 | Purchased 500 shares of common stock as treasury stock at $10 per share. |
Dec. | 31 | During the year, earned $250,000 of cash revenues and paid $175,000 of cash operating expenses. |
| 31 | Declared the dividend on the preferred stock and a $0.50 per share dividend on the common stock. |
| 31 | Closed revenue, expense, and dividend accounts to the retained earnings account. |
Required
a. Prepare journal entries for these transactions for 2011 and 2012 and post them to T-accounts.
b. Prepare the stockholders' equity section of the balance sheet at December 31, 2011.
c. Prepare the balance sheet at December 31, 2012.
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