Question

Problem 11-2A (Part Level Submission) The stockholders' equity accounts of Indigo Corporation on January 1, 2017, were as follows. Preferred Stock (7%, $100 par noncumulative, 4,000 shares authorized) Common Stock ($5 stated value, 326,000 shares authorized) Paid-in Capital in Excess of Par Value-Preferred Stock Paid-in Capital in Excess of Stated Value-Common Stock Retained Earnings Treasury Stock (4,000 common shares) $240,000 1,358,333 12,000 521,600 711,000 32,000 During 2017, the corporation had the following transactions and events pertaining to its stockholders' equity. Feb. 1 Mar. 20 Oct. 1 Nov. 1 Issued 4,620 shares of common stock for $32,340. Purchased 1,550 additional shares of common treasury stock at $9 per share. Declared a 7% cash dividend on preferred stock, payable November 1. Paid the dividend declared on October 1. Declared a $0.80 per share cash dividend to common stockholders of record on December 15, payable December 31, 2017. Determined that net income for the year was $279,000. Paid the dividend declared on December 1. Dec. 1 Dec. 31

Answer 1

Solution:

Date Credit Debit| $ 32,340 General Journal Feb-01 Cash Common Stock Paid in Capital in Excess of Stated Value $ 23,100 $9,240 $ 13,950 Mar-20 Treasury Stock - Common (1,550 * $9) Cash $ 13,950 $ 16,800 Oct-01 Retained Earnings ($240,000) * 7% Dividend Payable on Preferred stock $ 16,800 $ 16,800 Nov-01 Dividend Payable on Preferred stock Cash $ 16,800 $ 216,589 $ 216,589 Dec-01 Retained Earnings Dividend Payable on Common stock (No. of shares Outstanding * $0.80) |(271,666 +4,620 - 4,000 - 1,550)* $0.80 $ 216,589 Dec-31 Dividend Payable on Common Stock Cash $ 216,589 $ 279,000 Dec-31 Income Summary Retained Earnings $ 279,000 Shareholder's Equity Section of the Balance Sheet Shareholder's Equity Preferred stock (7% noncumulative, $100 par, 4,000 sh. authorized) 2,400 shares issued and outstanding $ 240,000 Paid-in-Capital in excess of par $ 12,000 $ 252,000 Common Stock (no par value, $5 Stated value, 326,000 shares Authorized) Issued and outstanding shares Paid-in-Capital in excess of stated value $ 1,381,433 $530,840 $ 1,912,273 $ 2,164,273 $ 756,611 $ 45,950 $ 2,874,934 Retained Earnings Less: Treasury preferred stock at Cost ($ 32,000 + $ 13,950) Statement of changes in Retained Earnings Balance as on 1- January 2017 Less: Dividend Paid on Preferred Stock Less: Dividend Paid on Common stock Add: Net Income during the year Balance of Retained Earnings Amount $ 711,000 $ 16,800 $216,589 $ 279,000 $ 756,611