Question

On January 1, 2018, Magnus Corporation had 60,000 shares of $1 par value common stock issued and outstanding. During the year, the following transactions occurred: Mar. 1 Issued 35,000 shares of common stock for $550,000. June 1 Declared a cash dividend of $2.00 per share to stockholders of record on June 15. July 30 Paid the $2.00 cash dividend. Dec. 1 Purchased 5,000 shares of common stock for the treasury for $22 per share. Dec. 15 Declared a cash dividend on outstanding shares of $2.20 per share to stockholders of record on December 31.
Prepare journal entries to record the above transactions.

Answer 1

Answer:

(A) March 1st

cash debit 550,000

common stock credit 35,000

additional paid-in credit 515,000

(B) June 1

dividends debit 180,000

dividends payable credit 180,000

(C) June 15

dividends payable debit 180,000

cash credit 180,000

(D) Dec 1

Treasury Stock debit 110,000

Cash credit 110,000

(E) Dec 15

dividends debit 187,000

dividends payable credit 187,000

Explanation:

(A)

$issued - par\: value = additional\: paid-in$

$issued - (common\: stock\: issued * face\: value\: per\: share) = additional\: paid-in$

$550,000 - (35,000 \times 1) = 515,000$

(B)

$60,000 \: beginning + 30,000 \: issued = 90,000 \: shares \: outstanding$

$shares \: outstanding \times dividends \: per \: share = dividends \: payable$

$90,000 \times 2 = 180,000$

(C)

payment of (B)

(D)

$shares \: purchased \times share \: price = treasury \: stock \\ 5,000 \times 22 = 110,000$

(E)

$60,000\: beginning + 30,000\: issued - 5,000\: treasury\: stock = 85,000\: shares\: outstanding$

$85,000 \times 2.20 = 187,000$