Question

During its first year of operations, Cupola Fan Corporation issued 43,000 of $1 par Class B shares for $450,000 on June 30, 2018. Share issue costs were $2,800. One year from the issue date (July 1, 2019), the corporation retired 10% of the shares for $46,000. Required: 1. to 4. Prepare the journal entry to record the issuance of the shares, the declaration of a $2.20 per share dividend on December 1, 2018, the payment of the dividend on December 31, 2018 and the retirement of the shares. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

To record the issuance of shares, debit Cash, credit Common Stock, and credit Additional Paid-in Capital. To record the payment of the dividend, debit Dividends Payable and credit Cash. To record the retirement of shares, debit Common Stock and credit Treasury Stock.

Step-by-step explanation:

To record the issuance of the shares, we need to debit Cash for the amount received ($450,000) and credit Common Stock for the par value of the shares issued ($43,000), and then credit Additional Paid-in Capital for the excess of the amount received over the par value. The journal entry for this transaction is:

Debit Cash $450,000

Credit Common Stock $43,000

Credit Additional Paid-in Capital $407,000

The declaration of the dividend is not relevant to the provided question, so we can skip that. To record the payment of the dividend, we need to debit Dividends Payable for the amount of the dividend ($2.20 per share * 43,000 shares) and credit Cash. The journal entry for this transaction is:

Debit Dividends Payable $94,600

Credit Cash $94,600

Finally, to record the retirement of the shares, we need to debit Common Stock for the par value of the shares retired (10% * $43,000) and credit Treasury Stock for the cost of the shares retired ($46,000). The journal entry for this transaction is:

Debit Common Stock $4,300

Credit Treasury Stock $46,000

Answer 2

cash 447,200 debit

common stock 43,000 credit

additional paid-in 404,200 credit

-- to record issuance of stocks --

dividends 94,600 debit

dividends payable 94,600 credit

-- to reocrd declaration of dividends --

dividends payable 94,600 debits

cash 94,600 credits

-- to record payment of cash dividends--

Step-by-step explanation:

issuance of share:

43,000 x 1 = 43,000 common stock

cash procced 447,200 (450,000 - 2,800 flotation cost)

addition paid in 404,200 (difference between common stokc and procceds

dividends entries

dividends: 43,000 x 2.2 = 94,600 dividends

when declaringwe use a payable account

at payment date we write-off the payable and decrease cash.