Financial Accounting: An Integrated Statements Approach, 2nd Edition

At the annual stockholders’ meeting on October 19, the board of directors presented a plan

for modernizing and expanding plant operations at a cost of approximately $2,500,000. The plan

provided (a) that the corporation borrow $780,000, (b) that 6,000 shares of the unissued preferred

stock be issued through an underwriter, and (c) that a building, valued at $900,000, and the land

on which it is located, valued at $120,000, be acquired in accordance with preliminary negotia-

tions by the issuance of 24,000 shares of common stock. The plan was approved by the stock-

holders and accomplished by the following transactions:

Nov. 5 Borrowed $780,000 from Bozeman National Bank, giving a 7% mortgage note.

20 Issued 6,000 shares of preferred stock, receiving $120 per share in cash from the

underwriter.

23 Issued 24,000 shares of common stock in exchange for land and a building, according to

the plan.

No other transactions occurred during November.

Instructions

Journalize the entries to record the foregoing transactions.

Elk River Corporation sells and services pipe welding equipment in Wyoming. The following

selected accounts appear in the ledger of Elk River Corporation on January 1, 2007, the begin-

ning of the current fiscal year:

Preferred 2% Stock, $100 par (80,000 shares authorized, 18,000 shares issued) $1,800,000

Paid-In Capital in Excess of Par—Preferred Stock 172,500

Common Stock, $10 par (800,000 shares authorized, 500,000 shares issued) 5,000,000

Paid-In Capital in Excess of Par—Common Stock 1,236,000

Retained Earnings 6,450,000

During the year, the corporation completed a number of transactions affecting the stock-

holders’ equity. They are summarized as follows:

a. Purchased 60,000 shares of treasury common for $1,080,000.

b. Sold 20,000 shares of treasury common for $420,000.

c. Sold 7,000 shares of preferred 2% stock at $108.

d. Issued 40,000 shares of common stock at $23, receiving cash.

e. Sold 35,000 shares of treasury common for $595,000.

f. Declared cash dividends of $2 per share on preferred stock and $0.16 per share on com-

mon stock.

g. Paid the cash dividends.

Instructions

Journalize the entries to record the transactions. Identify each entry by letter.

Aerotronics Enterprises Inc. produces aeronautical navigation equipment. The stockholders’ eq-

uity accounts of Aerotronics Enterprises Inc., with balances on January 1, 2007, are as follows:

Common Stock, $10 stated value (100,000 shares authorized,

60,000 shares issued) $600,000

Paid-In Capital in Excess of Stated Value 150,000

Retained Earnings 497,750

Treasury Stock (7,500 shares, at cost) 120,000

524 Chapter 11 Stockholders’ Equity: Capital Stock and Dividends

Problem 11-3A

Selected stock transactions

Goals3, 4, 7

GENERAL LEDGER

Problem 11-4A

Entries for selected corporate

transactions

Goals3, 4, 7, 8