Diamondback Welding & Fabrication Corporation sells and services pipe welding equipment in Illinois

Diamondback Welding & Fabrication Corporation sells and services pipe welding equipment in Illinois. The following selected accounts appear in the ledger of Diamondback Welding & Fabrication Corporation on July 1, 2014, the beginning of the current fiscal year:




Preferred 2% Stock, $80 par (100,000 shares authorized,
60,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,800,000
Paid-In Capital in Excess of Par—Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 210,000
Common Stock, $9 par (3,000,000 shares authorized,
1,750,000 shares issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,750,000
Paid-In Capital in Excess of Par—Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,400,000
Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,840,000


During the year, the corporation completed a number of transactions affecting the
stockholders’ equity. They are summarized as follows:
a. Purchased 87,500 shares of treasury common for $8 per share.
b. Sold 55,000 shares of treasury common for $11 per share.
c. Issued 20,000 shares of preferred 2% stock at $84.
d. Issued 400,000 shares of common stock at $13, receiving cash.
e. Sold 18,000 shares of treasury common for $7.50 per share.
f. Declared cash dividends of $1.60 per share on preferred stock and $0.05 per share on common stock.
g. Paid the cash dividends.

Instructions

Journalize the entries to record the transactions. Identify each entry by letter.


Answers:

a. Treasury Stock (87,500 shares × $8) 700,000
Cash 700,000
b. Cash (55,000 shares × $11) 605,000
Treasury Stock (55,000 shares × $8) 440,000
Paid-In Capital from Sale of Treasury Stock 165,000
[55,000 shares × ($11 – $8)]
c. Cash (20,000 shares × $84) 1,680,000
Preferred Stock (20,000 shares × $80) 1,600,000
Paid-In Capital in Excess of Par—Preferred
Stock [20,000 shares × ($84 – $80)] 80,000
d. Cash (400,000 shares × $13) 5,200,000
Common Stock (400,000 shares × $9) 3,600,000
Paid-In Capital in Excess of Par—Common
Stock [400,000 shares × ($13 – $9)] 1,600,000
e. Cash (18,000 shares × $7.50) 135,000
Paid-In Capital from Sale of Treasury Stock 9,000
[18,000 shares × ($8.00 – $7.50)]
Treasury Stock (18,000 shares × $8) 144,000
f. Cash Dividends {(80,000 shares × $1.60) + [(1,750,000 shares – 234,775
87,500 shares + 55,000 shares + 400,000 shares +
18,000 shares) × $0.05]}
Cash Dividends Payable 234,775
g. Cash Dividends Payable 234,775
Cash 234,775