Question

Italian Stallion has the following transactions during the year related to stockholders' equity

February 1 Issues 6,000 shares of no - par common stock for $ 16 per share.

May 15 Issues 700 shares of $10 par value preferred sotck for $13 per share.

October 1 Declares a cash dividend of $1.25 per share to all stockholders of record(both common and preferred) on October 15.

October 15 Date of record.

October 31 Pays the cash dividend declared on October 1.

Required:

Record each of these transactions.( omit account numbers and descriptions)

Answer 1

Answer:

The Journal entries are as follows:

(i) On February 1,

Cash A/c (6,000 × $16)     Dr. $96,000

To common stock                                   $96,000

(To record the issue of shares)

(ii) On May 15,

Cash A/c (700 × $13)                     Dr. $9,100

To Preferred stock (700 × $10)                         $7,000

To paid in capital in excess of par                    $2,100

(To record the issue of preferred shares)

(iii) On October 1,

Dividend expense A/c (6,700 × $1.25)   Dr. $8,375

To Dividend payable                                                  $8,375

(To record the declaration of dividend)

(iv) On October 15,

No journal entry.

(v) On October 31,

Dividend Payable A/c    Dr. $8,375

To cash                                              $8,375

(To record the payment of dividend)