Question

Sun Corporation received a charter that authorized the issuance of 86,000 shares of $6 par common stock and 19,000 shares of $75 par, 7 percent cumulative preferred stock. Sun Corporation completed the following transactions during its first two years of operation:
2018
Jan. 5 Sold 12,900 shares of the $6 par common stock for $8 per share.
12 Sold 1,900 shares of the 7 percent preferred stock for $85 per share.
Apr. 5 Sold 17,200 shares of the $6 par common stock for $10 per share.
Dec. 31 During the year, earned $303,500 in cash revenue and paid $241,400 for cash operating expenses.
31 Declared the cash dividend on the outstanding shares of preferred stock for 2018. The dividend will be paid on February 15 to stockholders of record on January 10, 2019.
31 Closed the revenue, expense, and dividend accounts to the retained earnings account.
2019
Feb. 15 Paid the cash dividend declared on December 31, 2017.
Mar. 3 Sold 2,850 shares of the $75 par preferred stock for $95 per share.
May 5 Purchased 550 shares of the common stock as treasury stock at $6 per share.
Dec. 31 During the year, earned $254,200 in cash revenues and paid $171,000 for cash operating expenses.
31 Declared the annual dividend on the preferred stock and a 0.50 per share dividend on the common stock.
31 Closed revenue, expense, and dividend accounts to the retained earnings account. Sold 14,400 shares of the $3 par common stock for $5 per share.
Record the entries in the General Journal of Sun Corporation. Note: Enter debits before credits.

Answer 1

Answer:

Sun Corporation

Journal Entries:

Jan. 5: Debit Cash $103,200

Credit Common stock $77,400

Credit APIC-Common stock $25,800

To record the sale of 12,900 shares at $8.

Jan. 12: Debit Cash $161,500

Credit 7% Cumulative Preferred stock $142,500

Credit APIC-Preferred stock $19,000

To record the sale of 1,900 shares at $85 each.

Apr. 5: Debit Cash $172,000

Credit Common stock $103,200

Credit APIC-Common stock $68,800

To record the sale of 17,200 at $10 each.

Dec. 31: Debit Cash $303,500

Credit Revenue $303,500

To record the revenue earned for the year.

Debit Operating expenses $241,400

Credit Cash $241,400

To record the payment of operating expenses for the year.

Debit Preferred Dividends $9,975

Credit Dividends Payable $9,975

To record the declaration of 7% on preferred stock of $142,500.

Debit Revenue $303,500

Credit Retained Earnings $303,500

To close revenue to retained earnings account.

Debit Retained Earnings $241,400

Credit Operating Expenses $241,400

To close operating expenses to retained earnings account.

Debit Retained Earnings $9,975

Credit Preferred Dividends $9,975

To close preferred dividends to retained earnings.

Feb. 15 Debit Dividends Payable $9,975

Credit Cash $9,975

To record the payment of Preferred dividends.

Mar. 3: Debit Cash $270,750

Credit 7% Cumulative Preferred stock $213,750

Credit APIC-Preferred stock $57,000

To record the issue of 2,850 shares at $95.

May 5: Debit Treasury Stock $3,300

Credit Cash $3,300

To record the repurchase of 550 common shares at $6.

Dec. 31: Debit Cash $254,200

Credit Revenue $254,200

To record revenue earned.

Debit Operating expenses $171,000

Credit Cash $171,000

To record the payment of operating expenses.

Debit Preferred Dividends $24,938

Credit Dividends Payable $24,938

To record the declaration of 7% on preferred stock of $356,250.

Debit Common Stock Dividends $14,775

Credit Dividends Payable $14,775

To record the declaration of $0.50 per share (29,550 common stock shares outstanding).

Debit Revenue $254,200

Credit Retained Earnings $254,200

To close the revenue to the retained earnings account.

Debit Retained Earnings $171,000

Credit Operating expenses $171,000

To close the operating expenses to the retained earnings account.

Debit Retained Earnings $39,713

Credit Preferred Dividends $24,938

Credit Common Stock Dividends $14,775

To close the dividends to the retained earnings account.

Explanation:

a) Data and Analysis:

Authorized share capital:

Common stock, 86,000 shares of $6 par

Outstanding common stock:

Jan. 5 = 12,900

Apr. 5 = 17,200

May 5 =   (550)

Total = 29,550 shares

7% Cumulative Preferred stock, 19,000 shares of $75 par

Outstanding preferred stock:

Jan. 12 =  1,900

Mar. 3 =  2,850

Total =    4,750 shares

APIC = Additional Paid-in Capital

Jan. 5: Cash $103,200 Common stock $77,400 APIC-Common stock $25,800 (12,900 * $8)

Jan. 12: Cash $161,500 7% Cumulative Preferred stock $142,500 APIC-Preferred stock $19,000 (1,900 * $85)

Apr. 5: Cash $172,000 Common stock $103,200 APIC-Common stock $68,800 (17,200 * $10)

Dec. 31: Cash $303,500 Revenue $303,500

Operating expenses $241,400 Cash $241,400

Preferred Dividends $9,975 Dividends Payable $9,975 (7% of $142,500)

Revenue $303,500 Retained Earnings $303,500

Retained Earnings $241,400 Operating Expenses $241,400

Retained Earnings $9,975 Preferred Dividends $9,975

Feb. 15 Dividends Payable $9,975 Cash $9,975

Mar. 3: Cash $270,750 7% Cumulative Preferred stock $213,750 APIC-Preferred stock $57,000 (2,850 * $95)

May 5: Treasury Stock $3,300 Cash $3,300 (550 * $6)

Dec. 31: Cash $254,200 Revenue $254,200

Operating expenses $171,000 Cash $171,000

Preferred Dividends $24,938 Dividends Payable $24,938 (7% of $356,250)

Common Stock Dividends $14,775 Dividends Payable $14,775 ($0.50 * 29,550)

Revenue $254,200 Retained Earnings $254,200

Retained Earnings $171,000 Operating expenses $171,000

Retained Earnings $39,713 Preferred Dividends $24,938 Common Stock Dividends $14,775

There are no shares of $3 par common stock.  This transaction is not treated here.