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Journal Entries to record Common Stock transactions

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Common Stock Transaction and Stockholders Equity
P1. On March 1, 2011 Dora Corporation began operations with a charter from the state that authorized 50,000 shares of $4 par value common stock. Over the next quarter, the firm engaged in the transactions that follow.
Mar. 1 issued 15,000 shares of common stock, $100,000.
Mar. 2 paid fees associated with obtaining the charter and starting up and organizing the corporation, $12,000.
Apr. 10 issued 6,500 shares of common stock, $65,000.
Apr. 15 purchased 2,500 shares of common stock, $25,000
May 31 the board of directors declared a $0.20 per share cash dividend to be paid on June 15 to shareholders of record on June 10.

1. Record the above transactions in the general journal.
2. Prepare the stockholders equity section of Dora Corporations balance sheet on May 31, 2011. Net income earned during the first quarter was $15,000.
3. What effect, if any, will the cash dividend declaration on May 31 have on Dora Corporation net income, retained earnings, and cash flows?

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Solution Preview

Dear Student:
There are two methods for recording treasury stock the cost method and the par value method. You didn’t stipulate which one you wanted so I used the cost method

1. Record the above transactions in general journal.
Date Dr Cr
Mar 1 Cash
Common stock
Paid in capital in excess of par $100,000
Mar 2 Organization Cost
Cash 12,000
Apr 10 Cash
Common Stock
Paid in capital in excess of par 65,000
Apr 15 Treasury Stock
Cash 25000

May 31 Cash Dividend

Solution Summary

Recording common stock transactions in the general journal, preparing the stockholders equity section of the balance sheet. Explanation of the effect of dividends declared on the net income, retained earnings, and cash flow of the company.