Kathleen Battle Corporation was organized on January 1, 2017.

It is authorized to issue 10,000 shares of

8%, $100 par value preferred stock, and 500,000 shares of no-par common stock with a stated value of
$1 per share. The following stock transactions were completed during the first year.

Jan. 10 Issued 80,000 shares of common stock for cash at $5 per share.

Mar. 1 Issued 5,000 shares of preferred stock for cash at $108 per share.

Apr. 1 Issued 24,000 shares of common stock for land. The asking price of the land was $90,000; the fair
value of the land was $80,000.

May 1 Issued 80,000 shares of common stock for cash at $7 per share.

Aug. 1 Issued 10,000 shares of common stock to attorneys in payment of their bill of $50,000 for
services rendered in helping the company organize.

Sept. 1 Issued 10,000 shares of common stock for cash at $9 per share.

Nov. 1 Issued 1,000 shares of preferred stock for cash at $112 per share.

Prepare the journal entries to record the above transactions. (Credit account titles are automatically
indented when amount is entered. Do not indent manually. If no entry is required, select “No Entry” for
the account titles and enter 0 for the amounts.)

Date Account Titles and Explanation Debit Credit

1. Jan. 10

-Cash 400,000

---Common Stock 80,000

---Paid-in Capital in Excess of Stated Value – Common Stock 320,000

2. Mar. 1

-Cash 540,000

---Preferred Stock 500,000

---Paid-in Capital in Excess of Pare – Preferred Stock 40,000

3. Apr. 1

-Land 80,000
---Common Stock 24,000

---Paid-in Capital in Excess of Stated Value – Common Stock 56,000

4. May 1

-Cash 560,000

---Common Stock 80,000

---Paid-in Capital in Excess of Stated Value – Common Stock 480,000

5. Aug. 1

-Organization Expense 50,000

---Common Stock 10,000

---Paid-in Capital in Excess of Stated Value – Common Stock 40,000

6. Sept. 1

-Cash 90,000

---Common Stock 10,000

---Paid-in Capital in Excess of Stated Value – Common Stock 80,000

7. Nov. 1

-Cash 112,000

---Preferred Stock 100,000

---Paid-in Capital in Excess of Pare – Preferred Stock 12,000

Solution:

1. Jan. 10

-Cash (80,000 x $5) = $400,000

---Common Stock (80,000 x $1) = $80,000

---Paid-in Capital in Excess of Stated Value—Common Stock (80,000 x $4) = $320,000

2. Mar. 1

-Cash (5,000 x $108) = $540,000

---Preferred Stock (5,000 x $100) = $500,000

---Paid-in Capital in Excess of Par—Preferred Stock (5,000 x $8) = $40,000

3. April 1

---Common Stock (24,000 x $1) = $24,000

---Paid-in Capital in Excess of Stated Value—Common Stock ($80,000 - $24,000) = $56,000

4. May 1

-Cash (80,000 x $7) = $560,000

---Common Stock (80,000 x $1) = $80,000

---Paid-in Capital in Excess of Stated Value—Common Stock (80,000 x $6) = $480,000

5. Aug. 1

---Common Stock (10,000 x $1) = $10,000

---Paid-in Capital in Excess of Stated Value—Common Stock ($50,000 - $10,000) = $40,000

6. Sept. 1

-Cash (10,000 x $9) = $90,000

---Common Stock (10,000 x $1) = $10,000

---Paid-in Capital in Excess of Stated Value—Common Stock (10,000 x $8) = $80,000

7. Nov. 1

-Cash (1,000 x $112) = $112,000

---Preferred Stock (1,000 x $100) = $100,000

---Paid-in Capital in Excess of Par Value—Preferred Stock (1,000 x $12) = $12,000

Dave Matthew Inc. issues 500 shares of $10 par value common stock and 100 shares of $100 par value
preferred stock for a lump sum of $100,000.

(a) Prepare the journal entry for the issuance when the market price of the common shares is $165
each and market price of the preferred is $230 each.

(b) Prepare the journal entry for the issuance when only the market price of the common stock is
known and it is $170 per share.

(Round answers to 0 decimal places, e.g. $1,225. Credit account titles are automatically indented when
amount is entered. Do not indent manually. If no entry is required, select “No Entry” for the account
titles and enter 0 for the amounts.)

a)

-Cash 100,000

---Paid-in Capital in Excess of Par – Common Stock 73,199

---Common Stock 5,000

---Paid-in Capital in Excess of Par – Preferred Stock 11,801

---Preferred Stock 10,000

b)

-Cash 100,000

---Preferred Stock 10,000

---Paid-in Capital in Excess of Par – Preferred Stock 5,000

---Common Stock 5,000

---Paid-in Capital in Excess of Par – Common Stock 80,000

Solution:

(a)

Fair value of Common (500 x $165) $ 82,500

Fair value of Preferred (100 x $230) 23,000 = $105,500

Allocated to Common: $82,500/$105,500 x $100,000=$78,199

Allocated to Preferred: $23,000/$105,500 x $100,000=21,801

Total allocation =$100,000

Common Stock (500 x $10) = $5,000

Paid-in Capital in Excess of Par—Common Stock ($78,199 - $5,000) = $73,199

Preferred Stock (100 x $100) = $10,000

Paid-in Capital in Excess of Par—Preferred Stock ($21,801 - $10,000) = $11,801

(b)

Lump-sum receipt=$100,000

Allocated to common (500 x $170) =(85,000)

Balance allocated to preferred=$15,000

Paid-in Capital in Excess of Par—Common Stock ($85,000 - $5,000)=$80,000

Paid-in Capital in Excess of Par—Preferred Stock ($15,000 - $10,000) = $5,000

The following information has been taken from the ledger accounts of Isaac Stern Corporation.

Total income since incorporation $317,000

Total cash dividends paid 60,000

Total value of stock dividends distributed 30,000

Gains on treasury stock transactions 18,000

Unamortized discount on bonds payable 32,000

Determine the current balance of retained earnings.

Current balance of retained earnings $227,000

Solution:
Total income since incorporation $317,000

Less: Total cash dividends paid $60,000

Total value of stock dividends 30,000 =90,000

Current balance of retained earnings $227,000

The unamortized discount on bonds payable is shown as a contra liability; the gains on treasury stock
are recorded as additional paid-in capital.

Clemson Company had the following stockholders’ equity as of January 1, 2017.

Common stock, $5 par value, 20,000 shares issued $100,000

Paid-in capital in excess of par—common stock 300,000

Retained earnings 320,000

Total stockholders’ equity=$720,000

During 2017, the following transactions occurred.

Feb. 1 Clemson repurchased 2,000 shares of treasury stock at a price of $19 per share.

Mar. 1 800 shares of treasury stock repurchased above were reissued at $17 per share.

Mar. 18 500 shares of treasury stock repurchased above were reissued at $14 per share.

Apr. 22 600 shares of treasury stock repurchased above were reissued at $20 per share.

Prepare the journal entries to record the treasury stock transactions in 2017, assuming Clemson uses
the cost method. (Credit account titles are automatically indented when amount is entered. Do not
indent manually. If no entry is required, select “No Entry” for the account titles and enter 0 for the
amounts.)

1. Feb. 1

-Treasury Stock 38,000

---Cash 38,000
2. Mar. 1

-Cash 13,600

-Retained Earnings 1,600

---Treasury Stock 15,200

3. Mar. 18

-Cash 7,000

-Retained Earnings 2,500

---Treasury Stock 9,500

4. Apr. 22

-Cash 12,000

---Treasury Stock 11,400

---Paid-in Capital from Treasury Stock 600

Clemson Company had the following stockholders’ equity as of January 1, 2017.

Common stock, $5 par value, 20,000 shares issued $100,000

Paid-in capital in excess of par—common stock 300,000

Retained earnings 320,000

Total stockholders’ equity=$720,000

During 2017, the following transactions occurred.

Feb. 1 Clemson repurchased 2,000 shares of treasury stock at a price of $19 per share.

Mar. 1 800 shares of treasury stock repurchased above were reissued at $17 per share.

Mar. 18 500 shares of treasury stock repurchased above were reissued at $14 per share.

Apr. 22 600 shares of treasury stock repurchased above were reissued at $20 per share.
Prepare the stockholders’ equity section as of April 30, 2017. Net income for the first 4 months of 2017
was $130,000. (Enter account name only and do not provide descriptive information.)

CLEMSON COMPANY

Stockholders’ Equity

April 30, 2017

Common Stock 100,000

a. Paid-in Capital in Excess of Par – Common Stock 300,000

b. Paid-in Capital from Treasury Stock 600

c. Total Paid-in Capital 400,600

d. Retained Earnings 445,900

Total = 846,500

3. Less:

a. Treasury Stock -1900

b. Total Stockholder’s Equity 844,600