Question

Entries for Selected Corporate Transactions

Selected transactions completed by Primo Discount Corporation during the current fiscal year are as follows.

Instructions:

Journalize the transactions. If no entry is required, select "No entry required" from the dropdown box and leave the amount boxes blank. For a compound transaction, if an amount box does not require an entry, leave it blank.

Jan. 15. Split the common stock 5 for 1 and reduced the par from $75 to $15 per share. After the split, there were 600,000 common shares outstanding.

Date	Account	Debit	Credit
Jan. 9.	No entry required
	No entry required

Feb. 28. Purchased 48,000 shares of the corporation's own common stock at $20, recording the stock at cost.

Date	Account	Debit	Credit
Feb. 28.

May 1. Declared semiannual dividends of $2.80 on 50,000 shares of preferred stock and $0.1 on the common stock to stockholders of record on June 1, payable on July 10.

Date	Account	Debit	Credit
May 1.

July 10. Paid the cash dividends.

Date	Account	Debit	Credit
July 10.

Sept. 7. Sold 35,000 shares of treasury stock at $25, receiving cash.

Date	Account	Debit	Credit
Sept. 7.

Oct. 1. Declared semiannual dividends of $2.80 on the preferred stock and $0.16 on the common stock (before the stock dividend).

Date	Account	Debit	Credit
Oct. 1.

Oct. 1. A 2% common stock dividend was declared on the common stock outstanding. The fair market value of the common stock is estimated at $27.

Date	Account	Debit	Credit
Oct. 1.

Dec. 1. Paid the cash dividends.

Date	Account	Debit	Credit
Dec. 1.

Dec. 1. Issued the certificates for the common stock dividend.

Date	Account	Debit	Credit
Dec. 1.

Answer 1

Journal entries:

Date	Account title and explanation	Debit	Credit
Jan.9	No entry required
Feb.28	Treasury stock [48,000 x $20]	$960,000
	Cash		$960,000
	[Purchase of own common stock]
May 1	Dividends	$195,200
	Dividends payable-preferred [50,000 x $2.80]		$140,000
	Dividends payable-common [(600,000-48,000 Treasury) x $0.1]		$55,200
	[Declaration of cash dividends]
July 10	Dividends payable-preferred	$140,000
	Dividends payable-common	$55,200
	Cash		$195,200
	[Payment of cash dividends]
Sept.7	Cash [35,000 x $25]	$875,000
	Treasury stock [35,000 x $20]		$700,000
	Paid-in capital in excess from treasury stock		$175,000
	[Sale of treasury stock]
Oct.1	Dividends	$198,700
	Dividends payable-preferred [50,000 x $2.80]		$140,000
	Dividends payable-common [587,000* x $0.1]		$58,700
	[Declaration of cash dividends]
Oct.1	Retained earnings [11,740 x $27]	$316,980
	Common stock dividend distributable		$316,980
	[Declaration of stock dividends]
Dec.1	Dividends payable-preferred	$140,000
	Dividends payable-common	$58,700
	Cash		$198,700
	[Payment of cash dividends]
Dec.1	Common stock dividend distributable	$316,980
	Common stock [11,740 x $15]		$176,100
	Paid-in capital in excess of par		$140,880
	[Payment of stock dividends]

Calculations:

Outstanding common shares
Jan.15	600,000
Feb.28 Treasury stock	-48,000
Sept.7 Sale of treasury stock	35,000
Balance before stock dividends	587,000*
Stock dividend [587,000 x 2%]	11,740
Balance after stock dividends	598,740