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, $1 par value, 100,000 shares authorized; 40,000 shares issued and outstanding 40,000 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 $1,990,000 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 $0.50 per share. Mar. 31 Converted $80,000 face value of convertible bonds payable (the book value of the bonds was $83,000) 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 $23 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.

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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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, $1 par value, 100,000 shares
authorized; 40,000 shares issued and outstanding	40,000
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	$1,990,000

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 $0.50 per share.
Mar.	31	Converted $80,000 face value of convertible bonds payable (the book value of the bonds was $83,000) 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 $23 per share.
	31	Closed net income of $103,000, to the Retained Earnings account.