Issuance of Stock

(1) Issuance of common stock: Par value portion is recorded in common stock. Price over the par value is recorded in the "Paid-in capital in excess of par value."

[Exercise]

Company A issued 20,000 shares of common stock at the price of $32 per share.

Par value of common stock is $1 per share.

Prepare the journal entry to record this transaction.

        

Cash

640,000

   Common stock, par value

20,000

   Paid-in capital in excess of par value, common stock

620,000

(2) Issuance of preferred stock: Par value portion is recorded in preferred stock. Price over the par value is recorded in the "Paid-in capital in excess of par value."

[Exercise]

Company B issued 10,000 shares of common stock at the price of $55 per share.

Par value of common stock is $10 per share.

Prepare the journal entry to record this transaction.

        

Cash

550,000

   Preferred stock, par value

100,000

   Paid-in capital in excess of par value, preferred stock

450,000

Cash Dividend, Stock Dividend and Stock Split

(1) Declaration of cash dividends: When cash dividends are declared, cash dividends (or retained earnings) are recorded on debit side. Dividends payable is recorded on credit side.

[Exercise]

On January 15, 2013, Company T declared a cash dividend of $5 per share for common stock. 200,000 shares of common stock were issued and outstanding. Prepare the journal entry to record this transaction.

        

Retained earnings (Cash dividends)

1,000,000

   Dividends payable

1,000,000

(2) Payment of cash dividends: Debit to dividends payable and credit to cash.

[Exercise]

On February 15, 2013, Company T paid cash dividend declared on January 15, 2013.

Prepare the journal entry to record this transaction.

        

Dividends payable

1,000,000

   Cash

1,000,000

(3) Stock dividends: Current shareholders receive additional shares in proportion to the number of shares held.

[Exercise]

On January 15, 2013, Company S declared a 12% stock dividend.

500,000 shares of common stock were issued and outstanding.

Par value of common stock is $1 per share.        

Fair value of common stock is $10 per share.

Prepare the journal entry to record this transaction.

        

Retained earnings (Stock dividends)

600,000

   Common stock dividend distributable

60,000

   Paid-in capital in excess of par value

540,000

        [Note]

        (a) 12% of 500,000 shares is 60,000 shares.

        (b) Fair value of 60,000 shares is $600,000.

[Exercise]

On February 15, 2013, Company S issued 60,000 shares of common stock for the stock dividend declared on January 15, 2013. Prepare the journal entry to record this transaction.

        

Common stock dividend distributable

60,000

   Common stock

60,000

Treasury stock

Purchase of treasury stock: Purchase amount is recorded as treasury stock on debit side. Treasury stock is not recorded as an asset, but subtracted from stockholders' equity.

[Exercise]

Company G repurchased 10,000 shares of its own common stock at the price of $15 per share.

Par value of common stock is $1 per share.

Prepare the journal entry to record this transaction.

        

Treasury stock

150,000

   Cash

150,000

        [Note]

        Treasury stock = 10,000 shares x $15 per share = $150,000