The following selected accounts appear in the ledger of Upscale Construction Inc. at the beginning of the current year: Preferred 2% Stock, $80 par (200,000 shares authorized, 65,000 shares issued) $5,200,000 Paid-In Capital in Excess of Par—Preferred Stock 360,000 Common Stock, $12 par (3,000,000 shares authorized, 1,400,000 shares issued) 16,800,000 Paid-In Capital in Excess of Par—Common Stock 1,290,000 Retained Earnings 110,900,000 During the year, the corporation completed a number of transactions affecting the stockholders’ equity. They are summarized as follows: Jan. 5 Issued 220,000 shares of common stock at $15, receiving cash. Feb. 10 Issued 6,000 shares of preferred 2% stock at $94. Mar. 19 Purchased 130,000 shares of treasury common for $19 per share. May 16 Sold 70,000 shares of treasury common for $23 per share. Aug. 25 Sold 40,000 shares of treasury common for $17 per share. Dec. 6 Declared cash dividends of $1.60 per share on preferred stock and $0.14 per share on common stock. 31 Paid the cash dividends. Required: Journalize the entries to record the transactions. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.

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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The following selected accounts appear in the ledger of Upscale Construction Inc. at the beginning of the current year:

Preferred 2% Stock, $80 par (200,000 shares authorized, 65,000 shares issued)	$5,200,000
Paid-In Capital in Excess of Par—Preferred Stock	360,000
Common Stock, $12 par (3,000,000 shares authorized, 1,400,000 shares issued)	16,800,000
Paid-In Capital in Excess of Par—Common Stock	1,290,000
Retained Earnings	110,900,000

During the year, the corporation completed a number of transactions affecting the stockholders’ equity. They are summarized as follows:

Jan.	5	Issued 220,000 shares of common stock at $15, receiving cash.
Feb.	10	Issued 6,000 shares of preferred 2% stock at $94.
Mar.	19	Purchased 130,000 shares of treasury common for $19 per share.
May	16	Sold 70,000 shares of treasury common for $23 per share.
Aug.	25	Sold 40,000 shares of treasury common for $17 per share.
Dec.	6	Declared cash dividends of $1.60 per share on preferred stock and $0.14 per share on common stock.
	31	Paid the cash dividends.

Required:

Journalize the entries to record the transactions. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.

**Journal Entries and Accounting Equation Overview**

This section demonstrates how to journalize transactions while adhering to the proper format and account titles. Below are journal entries recorded on a CNOW journal page, highlighting the impact on the accounting equation.

**Journal Entries**

1. **Date: January 5**
- *Cash* (Debit) - $3,300,000.00
- *Common Stock* (Credit) - $2,640,000.00
- *Paid-In Capital in Excess of Par-Common Stock* (Credit) - $660,000.00

2. **Date: February 10**
- *Cash* (Debit) - $564,000.00
- *Preferred Stock* (Credit)
- *Paid-In Capital in Excess of Par-Preferred Stock* (Credit)

3. **Date: March 19**
- *Treasury Stock*

**Explanation of Accounting Equation**

The entries affect the accounting equation in the following ways:

- **Assets (Cash) increase** when cash is received, reflected by a debit to Cash.
- **Equity increases** with credits to Common Stock and Preferred Stock, indicating an issuance of stock.
- **Paid-In Capital in Excess of Par** reflects the amount received over the par value of stock, impacting equity positively.

Note that the accounting equation ensures that assets always equal the sum of liabilities and equity. Each transaction is meticulously documented to reveal its effect on a firm's financial position.

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