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Major League Apparel has two classes of stock authorized: 4%, $10 par preferred, and $1 par value common. The following transactions affect stockholders’ equity during 2021, its first year of operations:



January 2 Issue 120,000 shares of common stock for $59 per share.
February 14 Issue 49,000 shares of preferred stock for $13 per share.
May 8 Purchase 12,000 shares of its own common stock for $49 per share.
May 31 Resell 6,000 shares of treasury stock for $54 per share.
December 1 Declare a cash dividend on its common stock of $0.55 per share and a $19,600 (4% of par value) cash dividend on its preferred stock payable to all stockholders of record on December 15. The dividend is payable on December 30. (Hint: Dividends are not paid on treasury stock.)
December 30 Pay the cash dividends declared on December 1.
Required:

1. Record each of these transactions. (If no entry is required for a particular transaction, select "No Journal Entry Required" in the first account field.)

Answer 1

Answer and Explanation:

No. Date General Journal Debit Credit

1. January 02, 2021

Dr Cash (120,000 shares x $59) $7,080,000

Cr Common Stock

(120,000 shares x $1) $120,000

Cr Additional Paid-in capital (120,000 shares x ($59- $1) $6,960,000

2. February 14, 2021

Dr Cash (49,000 shares x $13) $637,000

Cr Preferred Stock (49,000 shares x $10] $490,000

Cr Additional Paid-in capital

(49,000 shares x ($13- $10) $147,000

3. May 08, 2021

Treasury stock

Dr (12,000 shares x $49) $588,000

Cr Cash $588,000

4 May 31, 2021

Dr Cash

(6,000 shares x $54) $324,000

Cr Treasury Stock

(6,000 shares x $49) $294,000

Cr Additional Paid-in capital

(6,000 shares x ($54- $49) $30,000

5 May 08, 2021

Dr Dividends $82,300

Cr Dividend Payable $82,300

6 December 15, 2021

No Journal Entry Required

7 December 31, 2021

Dr Dividend Payable $82,300

Cr Cash $82,300

Total dividend

Outstanding common shares $114,000

×Cash dividend per common share outstanding 0.55

Cash dividend on Common Shares $62,700

Add: Dividend to preference shareholders 19,600

Total dividend $82,300

Outstanding common shares as of June 15

Number of shares of common stock at the beginning of the year 0

Add: Additional shares issued 120,000

Total common shares issued 120,000

Less: Treasury stock (12,000 shares - 6,000 shares) 6,000

Outstanding common shares$114,000

.

Answer 2

The following Journal Entries record the transactions in the books of Major League Apparel:

Journal Entries:

Jan. 2 Debit Cash $7,080,000

Credit Common Stock $120,000

Credit Additional Paid-in Capital - Common Stock $6,960,000

• To record the issuance of common stock at $59 each.

Feb. 14 Debit Cash $637,000

Credit 4% Preferred Stock $490,000

Credit Additional Paid-in Capital - Preferred Stock $147,000

• To record the issuance of preferred stock at $13 each.

May 8 Debit Treasury Stock $12,000

Debit Additional Paid-in Capital - Common Stock $576,000

Credit Cash $588,000

• To record the repurchase of common stock.

May 31 Debit Cash $324,000

Credit Common Stock $6,000

Credit Additional Paid-in Capital - Common Stock $318,000

• To record the re-issuance of treasury stock.

Dec. 1 Debit Dividends: Common Stock $62,700

Debit Dividends: Preferred Stock $19,600

Credit Dividends Payable $82,300

• To record the declaration of dividends.

Dec. 30 Debit Dividends Payable $82,300

Credit Cash $82,300

• To record the cash payment for dividends.

Data Analysis:

Authorized Capital:

4% Preferred Stock at $10 par value

Common Stock at $1 par value

Jan. 2 Cash $7,080,000 (120,000 x $59) Common Stock $120,000 Additional Paid-in Capital - Common Stock $6,960,000

Feb. 14 Cash $637,000 (49,000 x $13) 4% Preferred Stock $490,000 Additional Paid-in Capital - Preferred Stock $147,000

May 8 Treasury Stock $12,000 Additional Paid-in Capital - Common Stock $576,000 Cash $588,000 (12,000 x $49)

May 31 Cash $324,000 (6,000 x $54) Common Stock $6,000 Additional Paid-in Capital - Common Stock $318,000

Dec. 1 Dividends: Common Stock $62,700 (114,000 x $0.55) Preferred Stock $19,600 Dividends Payable $82,300

Dec. 30 Dividends Payable $82,300 Cash $82,300

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