The journal entries for the given transactions are recorded as follows:
1) The issue of preferred stock is recorded by debiting the cash account by $14,560,000 and crediting the preferred stock and additional capital by $13,000,000 and 156,000.
2) The repurchase of common stock is recorded by debiting the treasury stock and crediting the cash with the same amount of $223,200.
3) The dividend declared on preferred stock is recorded by debiting the retained earnings and crediting the dividend payable with equal amounts of $910,000 and at the time of making payment of dividends to preferred investors, the dividend payable should be debited and cash should be credited with same amounts of $910,000.
4) The dividend declared on common stock is recorded by debiting the retained earnings and crediting the dividend payable with equal amounts of $2,101,880. The dividends to common investors are recorded by debiting the dividend payable and crediting the cash with equal amounts of 2,101,880.
5) The transfer of net income at year-end is recorded by debiting the net income and crediting the Retained earnings with equal amounts of $3,546,000.
<h3>What are the journal entries?</h3>Journal entries are used to recognize the transactions of financial nature as and when entered by an entity. It is the primary step in the accounting process.
The journal entries for the provided transactions are as follows:
Date Particulars Debit ($) Credit ($)
Jan 10 Cash Account (130,000 shares X $112 ) 14,560,000
Preferred Stock (130,000 shares X $100) 13,000,000
Additional capital (130,000 shares X $12) 156,000
(To record the issue of preferred stock )
Feb 8 Treasury stock (18,600 shares X $12) 223,200
Cash 223,200
(To record the repurchase of common stock )
May 9 Retained earnings (130,000 X $100 X 7%) 910,000
Dividend payable 910,000
(To record the dividend declared on preferred stock )
Jun 8 Retained earnings(1,255,000-18,600 X $1.70) 2,101,880
Dividend payable 2,101,880
(To record the dividend declared on common stock )
Jun 10 Dividend payable 910,000
Cash 910,000
(To record the payment of preferred dividends)
July 1 Dividend payable 2,101,880
Cash 2,101,880
(To record the payment of common dividends)
Dec 31 Net income 3,546,000
Retained earnings 3,546,000
(To record the transfer of net income at year-end)
Therefore, the journal entries for the provided transactions are recognized as above.
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