Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 11 Stockholders’ Equity: Capital Stock and Dividends 517

Infinity.com, a software development firm, has stock outstanding as follows: 100,000 shares of

2% cumulative preferred stock of $20 par, and 50,000 shares of $100 par common. During its first

five years of operations, the following amounts were distributed as dividends; first year, none;

second year, $45,000; third year, $110,000; fourth year, $130,000; fifth year, $180,000. Calculate

the dividends per share on each class of stock for each of the five years.

On July 7, Sloth Inc., a marble contractor, issued for cash 40,000 shares of $25 par common stock

at $40, and on October 20, it issued for cash 15,000 shares of $100 par preferred stock at $120.

a. Journalize the entries for July 7 and October 20.

b. What is the total amount invested (total paid-in capital) by all stockholders as of

October 20?

On February 20, Mudguard Corp., a carpet wholesaler, issued for cash 100,000 shares of no-par

common stock (with a stated value of $10) at $15, and on April 30, it issued for cash 4,000 shares

of $25 par preferred stock at $30.

a. Journalize the entries for February 20 and April 30, assuming that the common stock is to

be credited with the stated value.

b. What is the total amount invested (total paid-in capital) by all stockholders as of April 30?

On August 29, Welch Corporation, a wholesaler of hydraulic lifts, acquired land in exchange for

10,000 shares of $15 par common stock with a current market price of $28. Journalize the entry

to record the transaction.

Pearl.com, with an authorization of 50,000 shares of preferred stock and 200,000 shares of com-

mon stock, completed several transactions involving its stock on May 1, the first day of opera-

tions. The trial balance at the close of the day follows:

Cash 475,000

Land 45,000

Buildings 80,000

Preferred 4% Stock, $50 par 100,000

Paid-In Capital in Excess of Par—Preferred Stock 25,000

Common Stock, $100 par 400,000

Paid-In Capital in Excess of Par—Common Stock 75,000

600,000 600,000

All shares within each class of stock were sold at the same price. The preferred stock was issued

in exchange for the land and buildings.

Journalize the two entries to record the transactions summarized in the trial balance.

Calvert Products Inc., a wholesaler of office products, was organized on January 5 of the current

year, with an authorization of 80,000 shares of 2% noncumulative preferred stock, $50 par and

250,000 shares of $100 par common stock. The following selected transactions were completed

during the first year of operations.

Exercise 11-3

Dividends per share

Goal 2

Preferred stock, 3rd year:
$0.75

Exercise 11-4

Entries for issuing par stock

Goal 3

Exercise 11-5

Entries for issuing no-par stock

Goal 3

Exercise 11-6

Issuing stock for assets other
than cash

Goal 3

Exercise 11-7

Issuing stock

Goal 3

Exercise 11-8

Issuing stock

Goal 3