Dozier Manufacturing was granted a corporate charter on January 3, 2009, and began operations shortly thereafter. Dozier’s charter authorizes the firm to issue up to 800,000 shares of $3 par value common stock and 50,000 shares of $100 par value preferred stock. The preferred stock carries an annual dividend rate of $5, is cumulative, and can be converted into Dozier common stock through December 31, 2018. Each share of preferred stock can be converted into two shares of Dozier common stock. During 2009, the following events or transactions affected the stockholders’ equity of Dozier.
January 10 Sold 22,000 shares of common stock for $18 per share.
March 30 Sold 5,000 shares of preferred stock for $145 per share.
June 12 Exchanged 3,000 shares of common stock for a building with an appraised value of $71,000. On this date, Dozier’s common stock was trading at $22 per share on a regional stock exchange.
October 3 Sold 7,000 shares of common stock for $27 per share.
November 4 Declared the annual cash dividend on outstanding preferred stock, payable on December 6, to stockholders of record on November 21.
December 6 Paid the preferred stock dividend.
Required:
(a) Prepare the journal entries for the events listed.
(b) Net income for 2009 was $734,000. Prepare all year-end closing entries for which data are available.
(c) Prepare the stockholders’ equity section of Dozier’s balance sheet as of December 31, 2009.
(d) Assume instead that Dozier’s common stock has no par value. Prepare the journal entries for the January 10, June 12, and October 3 transactions.
(e) Refer to the transaction on June 12. Assume that Dozier’s common stock is not publicly traded. Prepare the appropriate journal entry for this transaction given this assumption.
(f) What accounting principle dictates that Dozier include information in its financial statement footnotes regarding the specific features or stipulations attached to its preferred stock?