Answered Essay: Hatch Company has two classes of capital stock: 8%, $20 par preferred and $5 par common. At December 31, 201

ACC307 - FAIS III This assignment is due on Monday, September 11th + Hatch Company has two classes of capital stock: 8%, $20 par preferred and $5 par common. At December 31, 2017, the following accounts were included in stockholders equity Preferred Stock, 1,000,000 shares authorized, 150,000 shares issued and outstanding Common Stock, 5,000,000 shares authorized, 2,000,000 shares issued and outstanding Paid-in Capital in Excess of Par - Preferred Stock Paid-in Capital in Excess of Par - Common Stock Retained Earnings $3,000,000 10,000,000 200,000 27,000,000 4,500,000 The following transactions affected stockholders equity during 2018 Jan. 1 - 30,000 shares of preferred stock issued at $22 per share Feb. 1 - 100,000 shares of common stock issued at $20 per share June 1-Declared a 5% stock dividend on the outstanding common stock when the stock is selling for $25 per share June 20 Issued the stock dividend declared on June 1 July 1- 30,000 shares of common treasury stock purchased at $10 per share Sept. 15 - 10,000 shares of treasury stock reissued at $11 per share Dec. 31 - The preferred dividend is declared, and a common dividend at $0.50 per share is declared Dec. 31 - Net income is $2,100,000 Required: 1. Prepare Journal Entries to Record the Transactions 2. Post all information into T-accounts 3. Prepare the stockholders equity section for Hatch Company at December 31, 2018. Show all supporting computations

Hatch Company has two classes of capital stock: 8%, $20 par preferred and $5 par common. At December 31, 2017, the following accounts were included in stockholders’ equity. The following transactions affected stockholders’ equity during 2018. Jan. 1 – 30, 000 shares of preferred stock issued at $22 per share. Feb. 1 – 100, 000 shares of common stock issued at $20 per share. June 1 – Declared a 5% stock dividend on the outstanding common stock when the stock is selling for $25 per share. June 20 – Issued the stock dividend declared on June 1. July 1- 30, 000 shares of common treasury stock purchased at $10 per share. Sept. 15 – 10, 000 shares of treasury stock reissued at $11 per share. Dec. 31 – The preferred dividend is declared, and a common dividend at $0.50 per share is declared. Dec. 31 – Net income is $2, 100, 000. 1. Prepare Journal Entries to Record the Transactions. 2. Post all information into T-accounts. 3. Prepare the stockholders’ equity section for Hatch Company at December 31, 2018. Show all supporting computations.

Expert Answer

 

1. Journal Entries :

Date Accounts Titles Debit $ Credit $
Jan 1 Cash 30000*22 660000
Preference Stock 30000*20 600000
Paid in capital in excess of par – PS 30000*2 60000
Feb 1 Cash 100000*20 2000000
Common Stock 100000*5 500000
Paid in capital in excess of par – CS 100000*15 1500000
Jun 1 Retained Earnings 2100000*5%*25 2625000
Common Stock Distributable 105000*5 525000
Paid in capital in excess of par – CS 105000*20 2100000
Jun 20 Common Stock Distributable 525000
Common Stock 525000
July 1 Treasury Stock 30000*10 300000
Cash 300000
Sept 15 Cash 10000*11 110000
Treasury Stock 10000*10 100000
Paid in capital in excess of par – TS 10000*1 10000
Dec 31 Dividend Exp. 2185000*0.50 1092500
Pref.Dividend Exp. 180000*20*8% 288000
Dividend payable 1092500
Pref. Dividend payable 288000
Dec 31 Income Statement 2100000
Retained Earnings 2100000

2: T-Accounts:

DEBIT ENTRY AMOUNT $ CREDIT ENTRY AMOUNT $
COMMON STOCK ACCOUNT:
OB 10000000
FEB 1 500000
JUNE 20 525000
11025000
PREFERRED STOCK ACCOUNT:
OB 3000000
JAN 1 600000
Total 3600000
PAID IN CAPITAL IN EXCESS OF PAR – PS
OB 200000
JAN 1 60000
260000
PAID IN CAPITAL IN EXCESS OF PAR – CS :
OB 27000000
FEB 1 1500000
JUN 1 2100000
Total 30600000
RETAINED EARNINGS ACCOUNT :
JUNE 1 2625000 OB 4500000
DEC 1 1092500 DEC 31 2100000
DEC 1 288000
Closing Balance 2594500
6600000 6600000
TREASURY STOCK ACCOUNT :
JULY 1 300000 SEP 15 100000
Closing Bal 200000
300000

3. Stockholders’ Equity Section at Dec 31, 2018 :

Common Stock @ $5 par issued $11025000
Preferred Stock @ $20 par 3600000
Paid in capital in excess of par – cs 30600000
– ps 260000
– ts 10000
Share Capital paid 45495000
Add: Retained Earnings 2594500
Less: Treasury Stock (200000)
Share holders equity = 4788950
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