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, 10,000 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 | 560,000 |
| Total Stockholders' Equity | $2,000,000 |
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 $90,000 face value of convertible bonds payable (the book value of the bonds was $94,000) to common stock. Each $1,000 bond converted to 125 shares of common stock. |
| June | 1 | Acquired equipment with a fair market value of $46,000 in exchange for 300 shares of preferred stock. |
| Sept. | 1 | Acquired 11,000 shares of common stock for cash at $21 per share. |
| Nov. | 21 | Issued 5,000 shares of common stock at $23 cash per share. |
| Dec. | 28 | Sold 1,000 treasury shares at $25 per share. |
| Dec. | 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.
| Cash |
| Sep.01 | Answer | Answer | |
| Nov.21 | Answer | Answer | |
| Dec.28 | Answer | Answer | |
| | | | |
| Bonds Payable |
| Mar.31 | Answer | Answer | |
| | | | |
| Premium on Bonds Payable |
| Mar.31 | Answer | Answer | |
| | | | |
| Equipment |
| Jun.01 | Answer | Answer | |
| | | | |
| Preferred Stock |
| Beg. | Answer | Answer | |
| Jun.01 | Answer | Answer | |
| Bal. | Answer | Answer | |
| Common Stock |
| Beg. | Answer | Answer | |
| Mar.31 | Answer | Answer | |
| Nov.21 | Answer | Answer | |
| Bal. | Answer | Answer | |
| Paid-in-Capital in Excess of Par Value - Preferred Stock |
| Beg. | Answer | Answer | |
| Jun.01 | Answer | Answer | |
| Bal. | Answer | Answer | |
| Paid-in-Capital in Excess of Par Value - Common Stock |
| Beg. | Answer | Answer | |
| Mar.31 | Answer | Answer | |
| Nov.21 | Answer | Answer | |
| Bal. | Answer | Answer | |
| Paid-in-Capital from Treasury Stock |
| Dec.28 | Answer | Answer | |
| Bal. | Answer | Answer | |
| Treasury Stock - Common |
| Sept.01 | Answer | Answer | |
| Dec.28 | Answer | Answer | |
| Bal. | Answer | Answer | |
| Retained Earnings |
| Bal. | Answer | Answer | |
| Dec.31 | Answer | Answer | |
| Bal. | Answer | Answer | |
b. Prepare journal entries for the given transactions and post them to the T-accounts above in part a. Do not prepare the journal entry for the Dec. 31 transaction, but post the appropriate amount to the Retained Earnings T-account. Determine the ending balances for the stockholders equity accounts.
| General Journal |
| Date | Description | Debit | Credit |
| Jan.01 | (Memorandum) Common Stock split 2 for 1. | | |
| Mar.31 | Answer |
| Answer | Answer |
| | Premium on Bonds Payable | Answer | Answer |
| | Common Stock | Answer | Answer |
| | Answer |
| Answer | Answer |
| | To record conversion of bonds. | | |
| Jun.01 | Answer |
| Answer | Answer |
| | Paid-in-Capital in Excess of Par Value - Preferred Stock | Answer | Answer |
| | Issued preferred stock in exchange for equipment. | | |
| Sept.01 | Answer |
| Answer | Answer |
| | Purchased treasury stock. | | |
| Nov.21 | Answer |
| Answer | Answer |
| | Common Stock | Answer | Answer |
| | Answer |
| Answer | Answer |
| | Issued common stock. | | |
| Dec.28 | Answer |
| Answer | Answer |
| | Paid-in-Capital from Treasury Stock | Answer | Answer |
| | Answer |
| Answer | Answer |
| | To record sale of treasury stock. | | |
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