Recording Common and Preferred Stock Transactions

Gilmore Company has 20,000 authorized shares of common stock, $2 par, and also 20,000 authorized shares of preferred stock, $10 par.

Required

Record journal entries for the following separate transactions. Analyze and record each transaction separately.

a. On January 1, 2020, Gilmore sold 720 shares of common stock and 360 shares of preferred stock for a lump sum of $22,140. The common stock had been selling during the current week at $25 per share, and the preferred at $12 per share. Round amounts to the nearest dollar.

b. On January 1, 2020, Gilmore issued 324 shares of preferred stock for used equipment. The equipment had been appraised at $4,320, and the book value recorded by the seller was $2,160. A reliable determinable fair value on the preferred stock has not been established.

c. Assume that the 36,000 shares of preferred stock are callable for $12 per share at the option of the issuer, Gilmore. After issuing 900 shares of callable preferred stock on January 1, 2020, for $12, Gilmore recalled 180 shares of preferred stock on June 30, 2020, for $12. Record the entries for Gilmore on January 1, 2020, and on June 30, 2020.

d. Assume that each of the 36,000 shares of preferred stock is convertible into 2 shares of common stock at the option of the stockholder. After issuing 900 shares of convertible preferred stock on January 1, 2020, for $12, 180 shares of preferred stock were converted into common stock on June 30, 2020. Record the entries for Gilmore on January 1, 2020, and on June 30, 2020, assuming that the fair value of the preferred stock was $16 per share on June 30, 2020.