answer Foley Corporation has the following capital structure at the beginning of the year: 4%
Preferred stock. $50 par value, 20.000 shares authorized, 6,000 shares issued and outstanding
$300,000 Common stock, $10 par value, 60,000 shares authorized, 40,000 shares issued and
outstanding 400,000 Paid-in capital in excess of par 110,000 Total paid-in capital 810,000
Retained earnings 440,000 Total stockholders' equity $1,250,000 Instructions Record the
following transactions which occurred consccutivcly (show all calculations). total cash dividend
of $90,000 was declared and payable to stockholders of record. Record dividends on common
and preferred stock in separate accounts. A 15% common stock dividend was declared. Ihe
average fair value of the common stock is $22 a shore. Assume that net income for the year was
$140,000(record the closing entry).
Solution
Journal entries Foley Corp Sr No Accounts Dr $ Cr$ 1 Retained Earning 90,000
Preference dividend Payable (4% on preferred stock) 12,000 Common stock dividend
payable( balance) 78,000 2 Retained Earning 60,000 Common stock dividend
payable(15% on common stock) 60,000 3 Profit & Loss A/c 140,000 Reatined
earning 140,000