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Prepare Journal entries: selling par value common stock, declaring dividends, paying dividends and more...

Prepare Journal entries for each of the following:

1) Corporation sells 1,000,000 shares of $2.00 par value common stock to the public for a net proceeds of $10,000,000 on 10/1/2000.

2) Corporation declares a $.05 per share dividend units common stock on 9/15/2003. Total shares of common stock issued & outstanding on 9/15/2003 was 1,500,000.

3) Corporation pays the dividend declared in C) on 10/15/2003.

4) Corporation purchases 20,000 shares of its common stock for treasury at a price of $7.50 per share on 6/20/2004.

5) Corporation issues 10,000 shares of treasury stock for a parcel of land with an appraised value of $100,000 on 12/20/04.

6) On 7/1.2005 Corporation declared a 5% stock dividend payable on 8/1/2005 to shareholders of record on 7/15/2005. On 6/30/2005, corporation had a total of 1,750,00 $2 par common shares and the market price was $16.

7) For the year ended 12/31/2005 Corporation reports net income of $1,800.000.

8) On June 25,2004 Corporation declared a 2:1 stock split. Immediately preceding the stock split, they had 3,500,000 shares of $5.00 par value common stock outstanding.

B)
They sold $1,000,000 of 8% , 10 year bonds on July 1,2004 at a price of 107.1 to yield 7.0 %. The bonds pay interest semiannually on July 1 and January and mature on July 1, 2024. Prepare all necessary journal entries to record transactions relating to these bonds during the year 2004. Assume they use straight- line amortization of bond premium.

9) 7/1/2004 Sale of bond

10) 7/31 - 12/31/04 Monthly entry to record interest & amortization.

11) 1/1/2005 Payment of interest

12) What would they record as amortization of bond premium in 2005 if it used the effective interest method.

The entries don't have to be in spreadsheet form, they could be in short answer form. Thank you for all your help.

Solution This solution is FREE courtesy of BrainMass!

Posting ID: 56823 Business, Accounting/Business Analysis/Financial Reporting
Year 3 Journal entries

Prepare Journal entries for each of the following:
The entries don't have to be in spreadsheet form, they could be in short answer form. Thank you for all your help.
1) Corporation sells 1,000,000 shares of $2.00 par value common stock to the public for a net proceeds of $10,000,000 on 10/1/2000.

Dr: cash 10,000,000
Cr: common stock 2,000,000
Additional Paid-in Capital 8,000,000

2) Corporation declares a $.05 per share dividend units common stock on 9/15/2003. Total shares of common stock issued & outstanding on 9/15/2003 were 1,500,000.
The total dividend to be paid is 0.05*1,500,000 = 75,000
Since it is not paid yet, no transaction is involved, so no entry to be entered.

3) Corporation pays the dividend declared in C) on 10/15/2003.
Dr: dividend 75,000
Cr: Cash 75,000

4) Corporation purchases 20,000 shares of its common stock for treasury at a price of $7.50 per share on 6/20/2004.

Dr: common stock 40,000 (=20,000*$2)
Additional Paid-in Capital 110,000 (=150,000-40,000)
Cr: cash 150,000 (=20,000*$7.50)

5) Corporation issues 10,000 shares of treasury stock for a parcel of land with an appraised value of $100,000 on 12/20/04.
Dr: Treasury Stock 100,000
Cr: Cash 100,000
Dr: Land 100,000
Treasury Stock 100,000

6) On 7/1.2005 Corporation declared a 5% stock dividend payable on 8/1/2005 to shareholders of record on 7/15/2005. On 6/30/2005, corporation had a total of 1,750,000 $2 par common shares and the market price was $16.
The declared dividend = 1750,000 * $2 * 5% = $175,000
Again, no entry needed when the dividends are not paid.

7) For the year ended 12/31/2005 Corporation reports net income of $1,800.000.
This is just a report of financial statement. There is no transaction or journal entry.

8) On June 25,2004 Corporation declared a 2:1 stock split. Immediately preceding the stock split, they had 3,500,000 shares of $5.00 par value common stock outstanding.

Since the stock split doesn't change the total value of common stock outstanding, no entry is needed.

B) They sold $1,000,000 of 8%, 10 year bonds on July 1,2004 at a price of 107.1 to yield 7.0%. The bonds pay interest semiannually on July 1 and January, and mature on July 1, 2024. Prepare all necessary journal entries to record transactions relating to these bonds during the year 2004. Assume they use straight- line amortization of bond premium.

9) 7/1/2004 Sale of bond
07-01-2004 Dr: Cash 1071,000
Cr: Bonds Payable 1,000,000
Unamortized bond premium 71,000

10) 7/31 - 12/31/04 Monthly entry of record interest & amortization.
months of life of the bond = 12*20 = 240
monthly Amortization of Premium = 71000/240 = 295.83
monthly interest payable = 1,000,000 * 8%/12 = 6666.67

then Monthly entry of record interest & amortization:
XX-31-2004 Dr: Unamortized bond premium 295.83
interest expense 6370.84 (=6666.67-295.83)
Cr: interest payable 6666.67

11) 1/1/2005 Payment of interest
Dr: interest payable 40,000 = (6666.67*6)
Cr: Cash 40000

12) What would they record as amortization of bond premium in 2005 if it used the effective interest method.
By the effective interest method, interest is recorded each period as the effective market rate of interest multiplied by the outstanding balance of the debt during the interest period. The overpaid portion of the effective interest decreases the existing liability and is reflected as amortization of the premium.

Say, if the effective market rate of interest is 7%, the monthly interest expense is recorded as 7% *1071,000 = 74,970 annually. Then monthly interest expense = 6247.5

XX-31-2004 Dr: Unamortized bond premium 419.17 =(6666.67-6247.5)
interest expense 6247.5
Cr: interest payable 6666.67