Italian Stallion's Transactions During The Year
Ltalian Stallion Has Following Transactions During The Year Related To
Ltalian Stallion has following transactions during the year related to stockholders’ equity. February 1 Issued 4900 shares of no-par common stock for $14 per share. May 15 Issued 700 shares of $10 par value preferred stock for $11 per share. October 1 Declares a cash dividend of $0.70 per share to all stockholders of record (both common and preferred) on October 15. October 15 Date of record. October 31 Pays the cash dividend declared on October 1. Record each of these transactions. (If no entry is required for a transaction/event, select “No journal entry required†In the first account field.)
Paper For Above instruction
Introduction
The accurate recording of stockholders’ equity transactions is fundamental for maintaining precise financial statements in a corporation. Such transactions include issuing stock, declaring dividends, and dividend payments. This paper illustrates the journal entries necessary for Ltalian Stallion's transactions during the fiscal year, specifically focusing on stock issuance, dividend declaration, and dividend payment.
Issuance of Common Stock
On February 1, Ltalian Stallion issued 4,900 shares of no-par common stock at a price of $14 per share. Since the stock has no par value, the total proceeds are recognized directly in the common stock account and additional paid-in capital if applicable. The journal entry would be:
February 1:
| Account | Debit | Credit |
|---|---|---|
| Cash | $68,600 | |
| No-Par Common Stock | $68,600 |
(Note: Since no-par stock is issued, the entire proceeds are credited to the common stock account unless additional paid-in capital is explicitly specified. If the company's accounting policies allocate proceeds differently, relevant adjustments should be made.)
Issuance of Preferred Stock
On May 15, Ltalian Stallion issued 700 shares of preferred stock with a $10 par value at $11 per share. The journal entry recognizes the issuance of preferred stock at par value and the additional paid-in capital over par:
May 15:
| Account | Debit | Credit |
|---|---|---|
| Cash | $7,700 | |
| Preferred Stock | $7,000 | |
| Additional Paid-in Capital - Preferred Stock | $700 |
This entry reflects the net proceeds of $11 per share, with $10 allocated to preferred stock and the remaining $1 per share to additional paid-in capital.
Dividend Declaration
On October 1, Ltalian Stallion declared a cash dividend of $0.70 per share to all stockholders of record on October 15. The total number of shares includes both common and preferred shares issued.
Total shares outstanding:
- Common: 4,900
- Preferred: 700
- Total: 5,600 shares
The total dividend declaration amount:
5,600 shares * $0.70 = $3,920
The journal entry recognizes the dividend liability:
October 1:
| Account | Debit | Credit |
|---|---|---|
| Dividends | $3,920 | |
| Dividends Payable | $3,920 |
Dividend Payment
On October 31, Ltalian Stallion paid the declared dividend:
October 31:
| Account | Debit | Credit |
|---|---|---|
| Dividends Payable | $3,920 | |
| Cash | $3,920 |
This completes the recognition and settlement of the dividend.
Conclusion
Proper recording of these transactions ensures transparency, compliance with accounting standards, and facilitates accurate financial statement reporting. Issuing stock affects equity accounts directly, while dividends impact retained earnings and cash flows. Overall, precise journal entries enable stakeholders to assess the financial health of Ltalian Stallion effectively.
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