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    Accounting Entries for Stockholders Equity Section

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    The Primo Corporation began operations two years ago and was authorized to issue 500,000 shares of 6%, $100 par value preferred stock and 2,000,000 shares of $5 par value common stock.The following transactions and events were completed during 2014. (Note: at the beginning of 2014 there are 1,000 shares of preferred stock and 500,000 shares of common stock)

    Jan. 1 Issued an additional 40,000 shares of preferred stock for cash at $108 per share.
    Feb. 2 Issued an additional 300,000 shares of common stock for cash at $10 per share.
    Mar. 3 Declared a cash dividend on the preferred stock $123,000.
    Apr. 4 Discovered a $60,000 understatement of 2012 depreciation.
    May 5 Paid the cash dividend declared of March 3.
    June 6 Issued 4,000 shares of common stock for land that was advertised for sale at $45,000. The stock market price of the stock is $10 per share.
    Sept. 9 Primo purchased 4,500 shares of its own common stock at $13 per share.
    Oct. 10 Sold 3,000 shares of treasury stock for $14 per share
    Nov. 11 Declared a $1 cash dividend per share on common stock. (hint: compute the total number of shares of common stock outstanding.)
    Dec. 31 Determined that net income for the year was $1,750,000.

    Instructions
    (a) Journalize the transactions listed above.
    (b) Post only the stockholder's equity accounts.
    (c) Prepare a retained earnings statement for the year.
    (d) Prepare a stockholders' equity section at December 31, 2014.

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    Solution Summary

    The solution provides journal entries to record issue of common stock, preferred stock above par value, record dividend payable along with their payment entries.

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