Stockholders’ Equity Transactions
Seneca Inc. was organized on January 2, 2007, with authorized capital stock consisting of 50,000 shares of 10%, $200 par value preferred, and 200,000 shares of no par, no statedvalue common. During the first two years of the company’s existence, the following selected transactions took place:
2007
Jan. 2 Sold 10,000 shares of common stock at $16.
2 Sold 3,000 shares of preferred stock at $216.
Mar. 2 Sold common stock as follows: 10,800 shares at $22; 2,700 shares at $25.
July 10 Acquired a nearby piece of land, appraised at $400,000, for 600 shares of preferred stock and 27,000 shares of common. (Preferred stock was recorded at $216, the balance being assigned to common.)
Dec. 16 Declared the regular preferred dividend and a $1.50 common dividend.
28 Paid dividends declared on December 16.
31 Assume that revenues and expenses were closed to a temporary account, Income Summary. The Income
Summary account showed a credit balance of $450,000, which was transferred to Retained Earnings.
2008
Feb. 27 Reacquired 12,000 shares of common stock at $19. The treasury stock is carried at cost. (State law requires that an appropriation of Retained Earnings be made for the purchase price of treasury stock. Appropriations are to be returned to Retained Earnings upon resale of the stock.)
June 17 Resold 10,000 shares of the treasury stock at $23.
July 31 Resold all of the remaining treasury stock at $18.
Sept. 30 Sold 11,000 additional shares of common stock at $21.
Dec. 16 Declared the regular preferred dividend and an $0.80 common dividend.
28 Dividends declared on December 16 were paid.
31 The income summary account showed a credit balance of $425,000, which was transferred to Retained Earnings.
Instructions:
1. Give the journal entries to record these transactions.
2. Prepare the Stockholders’ Equity section of the balance sheet as of December 31, 2008.