Diamondback Welding & Fabrication Corporation sells and services pipe welding equip-ment in Illinois. The following selected accounts appear in the ledger of DiamondbackWelding & Fabrication Corporation at the beginning of the current fiscal year:Preferred 2% Stock, $80 par (100,000 shares authorized,60,000 shares issued) ....Paid-In Capital in Excess of Par-Preferred Stock.$ 4,800,000210,000Common Stock, $9 par (3,000,000 shares authorized,1,750,000 shares issued) ...15,750,000....Paid-In Capital in Excess of Par-Common Stock.Retained Earnings1,400,00052,840,000 During the year, the corporation completed a number of transactions affecting thestockholders' equity. They are summarized as follows:a. Purchased 87,500 shares of treasury common for $8 per share.b. Sold 55,000 shares of treasury common for $11 per share.c. Issued 20,000 shares of preferred 2% stock at $84.d. Issued 400,000 shares of common stock at $13, receiving cash.e. Sold 18,000 shares of treasury common for $7.50 per share.f. Declared cash dividends of $1.60 per share on preferred stock and $0.05 per shareon common stock.g. Paid the cash dividends.InstructionsJournalize the entries to record the transactions. Identify each entry by letter.

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Asked Dec 19, 2019
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Diamondback Welding & Fabrication Corporation sells and services pipe welding equip-
ment in Illinois. The following selected accounts appear in the ledger of Diamondback
Welding & Fabrication Corporation at the beginning of the current fiscal year:
Preferred 2% Stock, $80 par (100,000 shares authorized,
60,000 shares issued) ....
Paid-In Capital in Excess of Par-Preferred Stock.
$ 4,800,000
210,000
Common Stock, $9 par (3,000,000 shares authorized,
1,750,000 shares issued) ...
15,750,000
....
Paid-In Capital in Excess of Par-Common Stock.
Retained Earnings
1,400,000
52,840,000
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Diamondback Welding & Fabrication Corporation sells and services pipe welding equip- ment in Illinois. The following selected accounts appear in the ledger of Diamondback Welding & Fabrication Corporation at the beginning of the current fiscal year: Preferred 2% Stock, $80 par (100,000 shares authorized, 60,000 shares issued) .... Paid-In Capital in Excess of Par-Preferred Stock. $ 4,800,000 210,000 Common Stock, $9 par (3,000,000 shares authorized, 1,750,000 shares issued) ... 15,750,000 .... Paid-In Capital in Excess of Par-Common Stock. Retained Earnings 1,400,000 52,840,000

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During the year, the corporation completed a number of transactions affecting the
stockholders' equity. They are summarized as follows:
a. Purchased 87,500 shares of treasury common for $8 per share.
b. Sold 55,000 shares of treasury common for $11 per share.
c. Issued 20,000 shares of preferred 2% stock at $84.
d. Issued 400,000 shares of common stock at $13, receiving cash.
e. Sold 18,000 shares of treasury common for $7.50 per share.
f. Declared cash dividends of $1.60 per share on preferred stock and $0.05 per share
on common stock.
g. Paid the cash dividends.
Instructions
Journalize the entries to record the transactions. Identify each entry by letter.
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During the year, the corporation completed a number of transactions affecting the stockholders' equity. They are summarized as follows: a. Purchased 87,500 shares of treasury common for $8 per share. b. Sold 55,000 shares of treasury common for $11 per share. c. Issued 20,000 shares of preferred 2% stock at $84. d. Issued 400,000 shares of common stock at $13, receiving cash. e. Sold 18,000 shares of treasury common for $7.50 per share. f. Declared cash dividends of $1.60 per share on preferred stock and $0.05 per share on common stock. g. Paid the cash dividends. Instructions Journalize the entries to record the transactions. Identify each entry by letter.

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Expert Answer

Step 1

Prepare journal entries:

 

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A. Record the purchase of 87,500 shares of treasury common stock at $8 per share. Account Titles and Explanation Treasury Stock Debit ($) Credit ($) Date 700,000 Cash (87,500 sharesx$8 per share) 700,000 (To record the purchase of 87,500 treasurystock) B. Record the sale of 55,000 shares of treasury stock for cash at $11 per share. Debit Credit Account Titles and Explanation Date (S) (S) Cash (55,000 shares x$11 per share) 605,000 Treasury stock (55,000 shares x $8 per share) Paid-in capital from treasury stock (S605, 000- $440,000) (To record sale of treasury stock for above the cost price) 440,000 165,000 C. Record the issuance of par value preferred stock. Credit Date Account Titles and Explanation Debit ($) (S) Cash (20,000 sharesx $84) 1,680,000 Prefered Stock (20,000 sharesx $80) Paid-in Capital in Excess of Parvalue - Preferred Stock ($1, 680,000 -S1, 600,000) (To record issuance of 20,000 preferredshares in excess of par) 1,600,000 80,000

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Step 2
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D. Record the issuance of common stock. Account Titles and Explanation Cash (400,000 sharesx S13) Common Stock (400,000 shares x$5) Paid-in Capital in Excess of Parvalue - Common Stock ($5, 200,000-$2,000, 000) (To record issuance of 400,000 zhares in excess of par) Debit (S) Credit (S) Date 5,200,000 2,000,000 3,200,000 E. Record the sale of 18,000 shares of treasury stock for cash at $7.50 per share. Debit Credit S) Date Account Tides and Explanation (S) Cash (18,000 shares x$7.50 per share) Paid in capital from treasury stock ($144,000-S135,000) 135,000 20,000 Treasury stock (18,000 shares x$8 per share) (To record sale oftreasury stock for below the cast price) 144,000 F. Caleulate the amount of cash dividend declared and paid. Outstanding Bumber of Outstanding number of Particalars preferred shares common shares Beginning of year Transaction A increase common shares Transaction Bincreases preferred shares Transaction C decreases common shares Transaction D increase common shares Transaction E increase common shares Total outstandng shares at the end of the 60,000 1,750,000 -87,500 55,000 20.000 400,000 18.000 80,000 2,135,500 vear Multiply: Cash dividends per share Cath Dividends in total x S0 05 S106.775 x S1.60 $128.000

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