Question

Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 20Y8, were as follows:

a. Issued 15,000 shares of $20 par common stock at $30, receiving cash.
b. Issued 4,000 shares of $80 par preferred 5% stock at $100, receiving cash.
c. Issued $500,000 of 10-year, 5% bonds at 104, with interest payable semiannually.
d. Declared a quarterly dividend of $0.50 per share on common stock and $1.00 per share on preferred stock. On the date of record, 100,000 shares of common stock were outstanding, no treasury shares were held, and 20,000 shares of preferred stock were outstanding.

Required:
Journalize the selected transactions.

Answer 1

part a.

Cash $450,000 (debit)

Common Stock $300,000 (credit)

Share Premium $150,000 (credit)

part b.

Cash $400,000 (debit)

Preferred Stock $320,000 (credit)

Share Premium $80,000 (credit)

part c.

Cash $500,000 (debit)

Bonds Payable $500,000 (credit)

part d.

Dividend Declared - common stock $50,000 (debit)

Dividend Declared - preferred stock $20,000 (debit)

Shareholders for Dividends $70,000 (credit)

Step-by-step explanation:

For par value stock, any price paid in excess of the par value of that stock is accounted for in the share premium reserve of that stock.

When a dividend is declared, recognize the equity element - dividend declared for the class of equity that is entitled to the dividend to the extent of the stocks outstanding on the date the dividend is declared.Also recognize a liability - Shareholders for Dividends arising from the obligation that the entity has created (through the declaration) to its stockholders