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    Dividends and Stockholders' Equity Section

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    Elizabeth Company reported the following amounts in the stockholders' equity section of its December 31, 2010, balance sheet.

    Preferred Stock, 8%, $100 par (10,000 shares authorized, 2,000 shares issued) $200,000
    Common Stock, $5 par (100,000 shares authorized, 20,000 shares issued) $100,000
    Additional paid-in capital $125,000
    Retained Earnings $450,000
    Total $875,000

    During 2011, Elizabeth took part in the following transactions concerning stockholders' equity.
    1. Paid the annual 2010 $8 per share dividend on preferred stock and a $2 per share dividend on common stock. These dividends had been declared on December 31, 2010.
    2. Purchased 2,700 shares of its own outstanding common stock for $40 per share. Elizabeth uses the cost method.
    3. Reissued 700 treasury shares for land valued at $30,000.
    4. Issued 500 shares of preferred stock at $105 per share.
    5. Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $45 per share.
    6. Issued the stock dividend.
    7. Declared the annual 2011 $8 per share dividend on preferred stock and the $2 per share dividend on common stock. These dividends are payable in 2012

    Instructions
    (a) Prepare journal entries to record the transactions described above.
    (b) Prepare the December 31, 2011, stockholders' equity section. Assume 2011 net income was $330,000.

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    Solution Summary

    The solution discusses the dividends and stockholder's equity section to prepare journal entries and record transactions.

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