Required a. Set up T-accounts for the stockholders' equity accounts as of the beginning of the year and enter the January 1 balances. HINT: Complete part b. below prior to entering any additional T-account data. Bonds Payable Premium on Bonds Payable Cash Equipment Mar.31 Mar.31 70,000 v 125,000 x Jun.01 45,000 Sep.01 200,000 Nov.21 79,000 x Dec.28 1,000 x Preferred Stock Paid-in-Capital in Excess of Par Value - Preferred Stock Common Stock 400,000 v 80,000 v Beg. Beg. Beg. 200,000 v 45,000 x Jun.01 70,000 x Jun.01 Mar.31 445,000 x Bal. Nov.21 110,000 x Bal. Bal. 650,625 x Paid-in-Capital in Excess of Par Value - Common Stock Beg. 800,000 v Mar.31 Nov.21 Bal. Retained Earnings Paid-in-Capital from Treasury Stock Treasury Stock - Common Dec.28 Bal. Sept.01 550,000 v Bal. Dec.28 Dec.31 ох Bal. Bal. b. Prepare journal entries for the given transactions and post them to the T-accounts above in part a. Retained Earnings T-account. Determine the ending balances for the stockholders' equity accounts. Do not prepare the journal entry for the Dec. 31 transaction, but post the appropriate amount to the General Journal Credit Debit Description Date Jan.01 (Memorandum) Common Stock split 2 for 1. Mar.31 Bonds Payable 83,000 x $ Premium on Bonds Payable Common Stock Paid-in-Capital in Excess of Par Value 127,000 x 10,000 x - Common Stock + 200,000 x To record conversion of bonds. Jun.01 Equipment Preferred Stock Paid-in-Capital in Excess of Par Value - Preferred Stock Issued preferred stock in exchange for equipment. Sept.01 Treasury Stock - Common Cash Purchased treasury stock. Nov.21 Cash Common Stock Paid-in-Capital in Excess of Par Value - Common Stock Issued common stock. + Dec.28 Cash Paid-in-Capital from Treasury Stock Treasury Stock - Common To record sale of treasury stock.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Stockholders’ Equity Transactions, Journal Entries, and T-Accounts

The stockholders’ equity of Fremantle Corporation at January 1 follows:

8 Percent preferred stock, $100 par value, 20,000 shares
authorized; 4,000 shares issued and outstanding	$400,000
Common stock, $2 par value, 10,000 shares
authorized; 40,000 shares issued and outstanding	80,000
Paid-in capital in excess of par value-Preferred stock	200,000
Paid-in capital in excess of par value-Common stock	800,000
Retained earnings	550,000
Total Stockholders' Equity	$2,030,000

The following transactions, among others, occurred during the year:

Jan.	1	Announced a 2-for-1 common stock split, reducing the par value of the common stock to $1 per share.
Mar.	31	Converted $70,000 face value of convertible bonds payable (the book value of the bonds was $75,000) to common stock. Each $1,000 bond converted to 125 shares of common stock.
June	1	Acquired equipment with a fair market value of $45,000 in exchange for 300 shares of preferred stock.
Sept.	1	Acquired 10,000 shares of common stock for cash at $20 per share.
Nov.	21	Issued 5,000 shares of common stock at $22 cash per share.
Dec.	28	Sold 1,000 treasury shares at $24 per share.
	31	Closed net income of $103,000, to the Retained Earnings account.

Required
a. Set up T-accounts for the stockholders' equity accounts as of the beginning of the year and enter the January 1 balances.
HINT: Complete part b. below prior to entering any additional T-account data.
Bonds Payable
Premium on Bonds Payable
Cash
Equipment
Mar.31
Mar.31
70,000 v
125,000 x
Jun.01
45,000
Sep.01
200,000
Nov.21
79,000 x
Dec.28
1,000 x
Preferred Stock
Paid-in-Capital in Excess of Par Value - Preferred Stock
Common Stock
400,000 v
80,000 v
Beg.
Beg.
Beg.
200,000 v
45,000 x
Jun.01
70,000 x
Jun.01
Mar.31
445,000 x
Bal.
Nov.21
110,000 x
Bal.
Bal.
650,625 x
Paid-in-Capital in Excess of Par Value - Common Stock
Beg.
800,000 v
Mar.31
Nov.21
Bal.
Retained Earnings
Paid-in-Capital from Treasury Stock
Treasury Stock - Common
Dec.28
Bal.
Sept.01
550,000 v
Bal.
Dec.28
Dec.31
ох
Bal.
Bal.

b. Prepare journal entries for the given transactions and post them to the T-accounts above in part a.
Retained Earnings T-account. Determine the ending balances for the stockholders' equity accounts.
Do not prepare the journal entry for the Dec. 31 transaction, but post the appropriate amount to the
General Journal
Credit
Debit
Description
Date
Jan.01 (Memorandum) Common Stock split 2 for 1.
Mar.31 Bonds Payable
83,000 x $
Premium on Bonds Payable
Common Stock
Paid-in-Capital in Excess of Par Value
127,000 x
10,000 x
- Common Stock
+
200,000 x
To record conversion of bonds.
Jun.01 Equipment
Preferred Stock
Paid-in-Capital in Excess of Par Value - Preferred Stock
Issued preferred stock in exchange for equipment.
Sept.01 Treasury Stock
- Common
Cash
Purchased treasury stock.
Nov.21 Cash
Common Stock
Paid-in-Capital in Excess of Par Value - Common Stock
Issued common stock.
+
Dec.28 Cash
Paid-in-Capital from Treasury Stock
Treasury Stock - Common
To record sale of treasury stock.

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