Question

Selected transactions completed by Equinox Products Inc. during the fiscal year ended December 31, 20Y8, were as follows:

Answer 1

Answer:

part a.

Cash $450,000 (debit)

Common Stock $300,000 (credit)

Share Premium $150,000 (credit)

part b.

Cash $400,000 (debit)

Preferred Stock $320,000 (credit)

Share Premium $80,000 (credit)

part c.

Cash $500,000 (debit)

Bonds Payable $500,000 (credit)

part d.

Dividend Declared - common stock $50,000 (debit)

Dividend Declared - preferred stock $20,000 (debit)

Shareholders for Dividends $70,000 (credit)

Explanation:

For par value stock, any price paid in excess of the par value of that stock is accounted for in the share premium reserve of that stock.

When a dividend  is declared, recognize the equity element - dividend declared for the class of equity that is entitled to the dividend to the extent of the stocks outstanding on the date the dividend is declared.Also recognize a liability - Shareholders for Dividends arising from the obligation that the entity has created (through the declaration) to its stockholders