Answer:
<h2>Nautical</h2>
1. Journal Entries:
March 1:
Debit Cash Account $35,100
Credit Common Stock $35,100
To record the issue of 2,700 shares of common stock for $13 per share.
April 1:
Debit Cash Account $6,475
Credit Preferred STock $6,475
To record the issue of 175 shares of preferred stock for $37 per share.
June 1:
Debit Dividends $2,280
Credit Dividends Payable $2,280
To record dividends of $0.40 per share to all stockholders of record.
June 30:
Debit Dividends Payable $2,280
Credit Cash Account $2,280
To record the payment of cash dividends.
August 1:
Debit Treasury Stock $1,750
Credit Cash Account $1,750
To record the repurchase of 175 shares of common stock for $10 per share.
October 1:
Debit Cash Account $1,500
Credit Treasury Stock Account $1,500
To record the reissue of 125 shares of treasury stock for $12 per share.
2. Selection of whether each of these transactions would increase (+), decrease (?), on total assets, total liabilities, and total stockholders' equity:
Transaction Assets Liabilities Stockholders
Total Total Total Equity
Issue common stock $35,100 +$35,100 +$35,000
Issue preferred stock $6,475 +$6,475 +$6,475
Declare cash dividends $2,280 +$2,280 ?$2,280
Pay cash dividends $2,280 ?$2,280 ?$2,280
Repurchase treasury stock $1,750 ?$1,750 ?$1,750
Reissue treasury stock $1,500 +$1,500 +$1,500
Explanation:
a) Data and Calculations:
Authorized share capital:
$10 par preferred
$1 par value common
Issued, beginning of 2015:
Preferred = 125 shares
Common = 2,700 shares
b) The issue of 2,700 additional shares of common stock for $13 per share totalled $35,100. This amount is credited to the Common Stock and the receipt of cash debited to the Cash Account. The same is applicable with respect to the 175 additional shares issued at $37 per share.
c) When a cash dividend is declared, the stockholders of record on the record date of June 15 are noted, since they are the only ones that will participate in the dividends. The accounting records are debit to the dividend account and a credit to the Dividends Payable account, establishing the liability. The payment for the declared dividend is recorded with a debit to the Dividends Payable account to close the liability and a credit to the Cash Account.
d) Treasury stock is a stock of common stock repurchased by the company. The issue and reissue of treasury stock are treated in the treasury stock account if the costing method is used, otherwise, the par-value method would be operational.
