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Journal Entries for Stock Issuance, Treasury Transactions, and Dividend Allocations

This document details the journal entries for Sample Company concerning stock issuance, treasury stock transactions, and preferred dividends for the year 2008. It outlines the issuance of preferred and common stock, the repurchase and reissuance of treasury stock, and how to handle dividends, both cumulative and noncumulative. The methodology for recording these financial events, including treasury stock adjustments, is provided to ensure proper accounting practice in compliance with standard financial regulations.

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Journal Entries for Stock Issuance, Treasury Transactions, and Dividend Allocations

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  1. Now, using Sample Company information, record the following additional issues of common and preferred stock: Issued 100 shares of PS at $102 per share: Cash (100x $102) 10,200 PS (100x $100 par) 10,000 APIC - PS (plug) 200 Issued 500 shares of CS at $5 per share: Cash (500 x $5) 2,500 CS (500 x $1 par) 500 APIC - CS (plug) 2,000 4. Journal Entries-Sample Co.

  2. TT Corporation has 100,000 shares of $1 par value stock authorized, issued and outstanding at January 1, 2008. The stock had been issued at an average market price of $5 per share, and there have been no treasury stock transactions to this point. Assume that, in February of 2008, TT Corp. repurchases 10,000 shares of its own stock at $7 per share. In July of 2008, TT Corp. reissues 2,000 shares of the treasury stock for $8 per share. In December of 2008, TT Corp. reissues the remaining 8,000 shares for $6 per share. Prepare the journal entries for 2008 regarding the treasury stock. 5. TS - Example Problem

  3. Feb: repurchase 10,000 sh. @ $7 = $70,000. July: reissue 2,000 sh @ $ 8 = $16,000 (cost = 2,000 @ $7 = 14,000) 5. TS Example -Journal Entries TS 70,000 Cash 70,000 Cash 16,000 TS 14,000 APIC - TS 2,000

  4. Dec: reissue 8,000 sh. @ $ 6 = $48,000 (cost = 8,000 sh.@ $7 = 56,000) Now we need to debit one or more accounts to compensate for the difference. (1) debit APIC-TS (but lower limit is to -0-). (2) debit RE if necessary for any remaining balance (this is only necessary when we are decreasing equity). 5. TS Example -Journal Entries Cash 48,000 APIC-TS (1) 2,000 RE (2) 6,000 TS 56,000

  5. Pref. Div? 8% of par of 200,000 = $16,000 per year 1. Noncumulative- No pref. div. in 2006 and 2007 - not owed. Declare $100,000 div. in 2008; first $16,000 to pref., balance to common 2. Journal entries 7/1 RE (Pref. Div.) 16,000 RE (Common Div.) 84,000 Dividends Payable 100,000 8/1 Dividends Payable 100,000 Cash 100,000 Exercise 11-8

  6. Pref. Div? 8% of par of 200,000 = $16,000 per year 3. Cumulative- No pref. div. in 2006 and 2007 - but must catch up before div. to common Declare $100,000 div. in 2008 - First $16,000 x 2 = $32,000 to preferred, for prior years. - Next $16,000 to preferred for 2008 - Balance of $52,000 to common Exercise 11-8

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