Question

Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2021, 370 shares of preferred stock and 4,700 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2021:

March		1		Issue 1,800 shares of common stock for $49 per share.
May		15		Purchase 470 shares of treasury stock for $42 per share.
July		10		Resell 270 shares of treasury stock purchased on May 15 for $47 per share.
October		15		Issue 270 shares of preferred stock for $52 per share.
December		1		Declare a cash dividend on both common and preferred stock of $1.20 per share to all stockholders of record on December 15. (Hint: Dividends are not paid on treasury stock.)
December		31		Pay the cash dividends declared on December 1.

Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2021: Preferred Stock, $370; Common Stock, $47; Additional Paid-in Capital, $79,500; and Retained Earnings, $31,900. Net income for the year ended December 31, 2021, is $12,200.

Required:

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

2. Select whether each of the following transactions increases ( + ) or decreases ( − ) total assets, total liabilities, and total stockholders' equity. (If none of the categories apply for a particular item, leave the cell blank.)

Answer 1

						Effect of Transactions
Date		Account titles and explanation		Debit(in $)	Credit(in $)	Total Assets	Total Liabilities	Total shareholders equity
	Mar-01	Cash(1,800 shares*$49)		88200		Increase
		Common stock(1,800 shares*$0.01)			18			Increase
		Paid-in capital in excess of par value-common			88182			Increase
	May-15	Treasury stock(470 shares*$42)		19740				Decrease
		Cash			19740	Decrease
	Jul-10	Cash(270 shares*$47)		12690		Increase
		Treasury stock(270 shares*$42)			11340			Increase
		Paid in capital on sale of treasury stock			1350			Increase
	Oct-15	Cash(270 sahres*$52)		14040		Increase
		Prefered stock(270 sahres*$1)			270			Increase
		Paid-in capital in excess of par value-Prefered			13770			Increase
	Dec-01	Retained earnings		8328				Decrease
		Dividend payable			8328		Increase
	Dec-31	Dividend payable		8328			Decrease
		Cash			8328	Decrease
		Note:
		prefered shares outstanding on record date =270 shares + 370 shares =640 shares
		Prefered Dividend =640 shares*$1.20 =$768
		Commmon shares outstanding on record date =4,700 shares + 1,800 shares - 470 shares + 270 shares =6,300 shares
		Common Dividend =6,300 shares*$1.20 =$7,560