Question

Required information Problem 10-6A Record equity transactions and prepare the stockholders' equity section (LO10-2, 10-3, 10- 4, 10-5, 10-7) (The following information applies to the questions displayed below.) Major League Apparel has two classes of stock authorized: 6%, $10 par preferred, and $1 par value common. The following transactions affect stockholders' equity during 2021, its first year of operations: January 2 Issue 110,000 shares of common stock for $67 per share. February 14 Issue 57,000 shares of preferred stock for $12 per share. May 8 Purchase 11,000 shares of its own common stock for $57 per share. May 31 Resell 5,500 shares of treasury stock for $62 per share. December 1 Declare a cash dividend on its common stock of $0.40 per share and a $34,200 (6% 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. Problem 10-6A Part 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

Solution:

Journal Entries:

Date	Account Titles and Explanation	Debit	Credit
Jan. 2	Cash [110000*67]	$   7,370,000
	Common stock [110000*1]		$       110,000
	Paid-In-Capital in Excess of Par Common Stock [110000*66]		$   7,260,000
	(To record Common Stock Issued)
Feb. 14	Cash [57000*12]	$       684,000
	Preferred Stock [57000*10]		$       570,000
	Paid-In-Capital in Excess of Par Common Stock		$       114,000
	(To record Preferred Stock Issued)
May. 8	Treasury Stock [11000*57]	$       627,000
	Cash		$       627,000
	(To record Treasury Stock purchased)
May. 31	Cash [ 5500*62	$       341,000
	Treasury Stock [5500*57]		$       313,500
	Add Paid-In Cap - Treasury Stock		$         27,500
	(To record treasury stock resold)
Dec.1	Cash Dividend	$         76,000
	Dividend Payable-Common Stock [(110000-11000+5500)*0.4]		$         41,800
	Dividend Payable-Preferred Stock		$         34,200
	[To record cash dividend payable]
Dec. 30	Dividend Payable-Common Stock	$         41,800
	Dividend Payable-Preferred Stock	$         34,200
	Cash		$         76,000
	[To record dividend paid]

Statement of Stockholders` Equity Section:

MAJOR LEAGUE APPAREL
Balance Sheet
[Stockholders` Equity Section]
31-Dec-21
Stockholder's equity :
6% Preferred Stock, $10 par, 57,000 shares issued and outstanding	$       570,000
Common Stock, $1 par value, 110,000 shares issued and 104,500 shares outstanding	$       110,000
Paid-in capital in excess of par-preferred stock	$       114,000
Paid-in capital in excess of par-common stock	$   7,260,000
Paid-in capital in excess of par-treasury stock	$         27,500
Total paid in capital	$   8,081,500
Retained Earnings [Net Income]	$       487,000
Subtotal	$   8,568,500
Less: Treasury Stock [ 5500*57]	$    (313,500)
Total stockholder's Equity	$   8,255,000