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Entries for selected corporate transactions West Yellowstone Outfitters Corporation manufactures and distributes leisure clothing. Selected transactions completed by West Yellowstone Outfitters during the current fiscal year are as follows: Jan. 15. Split the common stock 4 for 1 and reduced the par from $120 to $30 per share. After the split, there were 800,000 common shares outstanding. Mar. 1. Declared semiannual dividends of $0.25 on 100,000 shares of preferred stock and $0.07 on the 800,000 shares of $30 par common stock to stockholders of record on March 31. payable on April 30. Apr. 30. Paid the cash dividends. May 31. Purchased 60.000 shares of the corporation's own common stock at $32 recording the stock at cost. Aug. 17. Sold 40,000 shares of treasury stock at $38, receiving cash. Sept. 1. Declared semiannual dividends of $0.25 on the preferred stock and $0.09 on the common stock (before the stock dividend). In addition, a 1% common stock dividend was declared on the common stock outstanding, to be capitalized at the fair market value of the common stock, which is estimated at $40. ’The dividend date of record is September 30, payable on October 31. Oct. 31. Paid the cash dividends and issued the certificates for the common stock dividend. Instructions Journalize the transactions.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 13, Problem 13.5BPR
Textbook Problem

Entries for selected corporate transactions

West Yellowstone Outfitters Corporation manufactures and distributes leisure clothing. Selected transactions completed by West Yellowstone Outfitters during the current fiscal year are as follows:

Jan. 15. Split the common stock 4 for 1 and reduced the par from $120 to $30 per share. After the split, there were 800,000 common shares outstanding.

Mar. 1. Declared semiannual dividends of $0.25 on 100,000 shares of preferred stock and $0.07 on the 800,000 shares of $30 par common stock to stockholders of record on March 31. payable on April 30.
Apr. 30. Paid the cash dividends.
May 31. Purchased 60.000 shares of the corporation's own common stock at $32 recording the stock at cost.
Aug. 17. Sold 40,000 shares of treasury stock at $38, receiving cash.
Sept. 1. Declared semiannual dividends of $0.25 on the preferred stock and $0.09 on the common stock (before the stock dividend). In addition, a 1% common stock dividend was declared on the common stock outstanding, to be capitalized at the fair market value of the common stock, which is estimated at $40. ’The dividend date of record is September 30, payable on October 31.
Oct. 31. Paid the cash dividends and issued the certificates for the common stock dividend.

Instructions

Journalize the transactions.

Expert Solution
To determine

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Treasury Stock: It refers to the shares that are reacquired by the corporation that are already issued to the stockholders, but reacquisition does not signify retirement.

Par value: It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.

Stated value: It refers to an amount per share, which is assigned by the board of directors to no par value stock.

Issue of common stock for non-cash assets or services: Corporations often issue common stock for the services received from attorneys or consultants as compensation, or for the purchase of non-cash assets such as land, buildings, or equipment.

Retained earnings statement

This is a financial statement that shows the amount of the net income retained by a company at a particular point of time for reinvestment and pays its debts and obligations. It shows the amount of retained earnings that is not paid as dividends to the shareholders.

Stockholders’ equity: It refers to the amount of capital that includes the amount of investment by the stockholders, earnings generated from the normal business operations, and less any dividends paid to the stockholders.

To Journalize: The transactions.

Explanation of Solution

Journalize the transactions for Corporation WYO.

Date Account Titles and Explanation Debit ($) Credit ($)
January 15 No entry is required
March 1 Cash Dividends                                        (1) 81,000
     Cash Dividends Payable 81,000
(To record the payment of cash dividends)
July 10 Cash Dividends Payable                          (1) 81,000
     Cash 81,000
(To record the declaration of cash dividends)
May 31 Treasury stock (60,000 shares×$32 per share) 1,920,000
      Cash 1,920,000
(To record the purchase of 60,000 shares of treasury stock)
August 17 Cash (40,000 shares × $38 per share) 1,520,000

     Treasury stock       

(40,000 shares × $32 per share)

1,280,000

     Paid-in capital from treasury stock

($1,520,000$1,280,000)

240,000
(To record sale of treasury stock for above the cost price)
September 1 Cash Dividends                                        (3) 95,200
     Cash Dividends Payable 95,200
(To record the declaration of cash dividends)
October 1 Stock Dividends                                       (6) 312,000

    Common Stock Dividends Distributable                        

(7)

234,000

    Paid-in Capital in excess of par

    Value-Common stock                          (8)

78,000
(To record the declaration of stock dividends)
October 31 Cash Dividends Payable                         (3) 95,200
     Cash 95,200
(To record the payment of cash dividends)
October 31 Common Stock Dividends Distributable (7) 234,000
    Common Stock 234,000
(To record the distribution of stock dividends)

Working note:

Compute the amount of total cash dividends declared on March 1.

Amount of total cash dividendsdeclared on March 1} =[Cash divided for preferrence shares +Cash divided for common shares +]=[(Number of preferrence sharesoutstanding×$0.07 per share)+(Number of common sharesoutstanding×$0

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