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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.

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 13, Problem 5PB
Textbook Problem
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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.

To determine

Journalize the transactions.

Explanation of Solution

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.

Journalize the transactions for Corporation WYO.

DateAccount Titles and ExplanationDebit ($)Credit ($)
January 15No entry is required  
 
March1Cash Dividends                                        (1)                                                        81,000 
       Cash Dividends Payable 81,000
  (To record the payment of cash dividends)  
 
July 10Cash Dividends Payable                          (1)                                                        81,000 
       Cash  81,000
  (To record the declaration of cash dividends)  
 
May 31Treasury 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)  
 
August17Cash (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)  
 
September1Cash Dividends                                        (3)                                                        95,200 
       Cash Dividends Payable 95,200
  (To record the declaration of cash dividends)  
 
October1Stock Dividends                                       (5)312,000 
  

    Common Stock Dividends Distributable                           

                                                                  (6)

 234,000
  

    Paid-in Capital in excess of par 

    Value-Common stock                          (7)

 78,000
  (To record the declaration of stock dividends)  
 
October31Cash Dividends Payable                         (3)                                                        95,200 
       Cash  95,200
  (To record the payment of cash dividends)  
 
October31Common Stock Dividends Distributable (6)                                234,000 
      Common Stock 234,000
  (To record the distribution of stock dividends)  

Working notes:

(1)

Compute the amount of total cash dividends declared on March 1

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