Pistons Inc. recently hired a new accountant with extensive experience in accounting for partnerships. Because of the pressure of the new job, the accountant was unable to review what he had learned earlier about corporation accounting. During the first month, he made the following entries for the corporation’s capital stock.
(Issued 12,000 shares of $5 par value common stock at $16 per share)
(Issued 10,000 shares of $30 par value preferred stock at $60 per share)
(Purchased 1,000 shares of common stock for the treasury at $15 per share)
Gain on Sale of Stock
(Sold 500 shares of treasury stock at $17 per share)
On the basis of the explanation for each entry, prepare the entries that should have been made for the capital stock transactions.
The total cumulative dividend is $240,000.
The total paid-in capital in excess of par is $70,000.
The shares of ownership issued by a corporation are capital stock. The sum received by the corporation when its shares of capital stock were issued is represented as paid-in capital on the balance sheet in the shareholders' equity section.
(a) The Cumulative dividend is disclosed in a note to the stockholders’ equity section; it is not reported as a liability.
Preferred stock A/c.
Common Stock A/c.
Paid-in Capital in excess of par common
To record the issue of stock
Preferred stock, ($100 par, 8% 10,000 shares issued)
Paid-in Capital in excess of par (10,000*$7)
The following note related to stockholders’ equity was reported in Wiebold, Inc.’s annual report.
On February 1, the Board of Directors declared a 3-for-2 stock split, distributed on February 22 to shareholders of record on February 10. Accordingly, all numbers of common shares, except unissued shares and treasury shares, and all per share data have been restated to reflect this stock split.
On the basis of amounts declared and paid, the annualized quarterly dividends per share were $0.80 in the current year and $0.75 in the prior year.
(Dividend Entries) The following data were taken from the balance sheet accounts of Masefield Corporation on December 31, 2016.
Current assets $540,000
Debt investments (trading) 624,000
Common stock (par value $10) 500,000
Paid-in capital in excess of par 150,000
Retained earnings 840,000
Prepare the required journal entries for the following unrelated items.
Mary Tokar is comparing a GAAP-based company to a company that uses IFRS. Both companies report equity investments. The IFRS company reports unrealized losses on these investments under the heading “Reserves” in its equity section. However, Mary can find no similar heading in the GAAP-based company financial statements. Can Mary conclude that the GAAP-based company has no unrealized gains or losses on its non-trading equity investments? Explain.
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