A Journal entries for transactions Amount ($) Date Particulars Lf/No Dr Cr Narration Feb 1, 2014 Bank A/c Dr 30,000 Issued 5,000 shares of common stock for $30,000 To Common Stock A/c 30,000 Mar 20, 2014 Treasury Stock A/c Dr 4,000 Purchased 1,000 additional shares of common treasury stock at $7 per share. Additional Paid in Capital A/c Dr 3,000 To Bank A/c 7,000 Mar 20, 2014 Common Stock A/c Dr 4,000 Balance adjusted in common stock A/c To Treasury Stock A/c 4,000 Oct 1, 2014 Dividend A/c Dr 21,000 declared a 7% cash dividend on preferred stock, payable November 1 = 300000*7% To Dividend Payable A/c 21,000 Nov 1, 2014 Dividend Payable A/c Dr 21,000 paid the dividend declared on October 1 To Cash A/c 21,000 Dec 1, 2014 Dividend A/c Dr 14,500 declared a $0.50 per share cash dividend to common stockholders of record on December 15, payable December 31, 2014. = (25000(100000/4)+5000-1000) * 0.50 $ To Dividend Payable A/c 14,500 Dec 31, 2014 Dividend Payable A/c Dr 14,500 Dividend Paid To Cash A/c 14,500 Dec 31, 2014 Retained Earnings A/c Dr 35,500 entries to close net income and dividends to retained earnings To Dividend Payable A/c 35,500 B Stockholders equity A/c Dr Cr Date Particlulars Amount Date Particlulars Amount 20.03.2014 To Treasury Stock A/c 4,000 1.01.2014 By Bal c/d 1,00,000 31.12.2014 To Bal c/fwd 1,26,000 01.02.2014 By Bank A/c 30,000 Total 1,30,000 Total 1,30,000 C Balance sheet extract as on Dec 31, 2014 StockHolders Equity Amount Common Stock 1,26,000 Preferred Stock 3,00,000 Additional Paid in Capital for Preferred stock 15,000 Additional Paid in Capital for Common stock 4,77,000 Retained Earnings 2,44,500 Total 11,62,500 D Dividend Percentage of earnings - Payout Ratio A Dividend on common stock 14,500 B Retained earnings 2,80,000 C Payout Ratio (A/B)*100 5.18 Earnings per share - Earnings available to equity shareholders divided by total no.of shares A Retained earnings 2,80,000 B Less Dividend on preferred stock -21,000 C Earnings available to equity shareholders 2,59,000 D Total no.of shares ( 100000/4 = 25000+5000-1000 ) 29,000 E EPS (C/D ) 8.93 F Dividend on common stock 14,500 G Total Value of common stock 1,26,000 H Return on Common Stock ( F/G) 11.51% Solution A Journal entries for transactions Amount ($) Date Particulars Lf/No Dr Cr Narration Feb 1, 2014 Bank A/c Dr 30,000 Issued 5,000 shares of common stock for $30,000 To Common Stock A/c 30,000 Mar 20, 2014 Treasury Stock A/c Dr 4,000 Purchased 1,000 additional shares of common treasury stock at $7 per share. Additional Paid in Capital A/c Dr 3,000 To Bank A/c 7,000 Mar 20, 2014 Common Stock A/c Dr 4,000 Balance adjusted in common stock A/c To Treasury Stock A/c 4,000 Oct 1, 2014 Dividend A/c Dr 21,000 declared a 7% cash dividend on preferred stock, payable November 1 = 300000*7% To Dividend Payable A/c 21,000 Nov 1, 2014 Dividend Payable A/c Dr 21,000 paid the dividend declared on October 1 To Cash A/c 21,000 Dec 1, 2014 Dividend A/c Dr 14,500 declared a $0.50 per.

1. A Journal entries for transactions Amount ($) Date Particulars Lf/No Dr Cr Narration
Feb 1, 2014 Bank A/c Dr 30,000 Issued 5,000 shares of common stock for $30,000
To Common Stock A/c 30,000 Mar 20, 2014 Treasury Stock A/c Dr
4,000 Purchased 1,000 additional shares of common treasury stock at $7 per share. Additional
Paid in Capital A/c Dr 3,000 To Bank A/c 7,000 Mar 20, 2014
Common Stock A/c Dr 4,000 Balance adjusted in common stock A/c To Treasury
Stock A/c 4,000 Oct 1, 2014 Dividend A/c Dr 21,000 declared a 7%
cash dividend on preferred stock, payable November 1 = 300000*7% To Dividend Payable
A/c 21,000 Nov 1, 2014 Dividend Payable A/c Dr 21,000 paid the
dividend declared on October 1 To Cash A/c 21,000 Dec 1, 2014 Dividend
A/c Dr 14,500 declared a $0.50 per share cash dividend to common stockholders of record
on December 15, payable December 31, 2014. = (25000(100000/4)+5000-1000) * 0.50 $ To
Dividend Payable A/c 14,500 Dec 31, 2014 Dividend Payable A/c Dr
14,500 Dividend Paid To Cash A/c 14,500 Dec 31, 2014 Retained
Earnings A/c Dr 35,500 entries to close net income and dividends to retained earnings
To Dividend Payable A/c 35,500 B Stockholders equity A/c Dr Cr Date
Particlulars Amount Date Particlulars Amount 20.03.2014 To Treasury Stock A/c 4,000
1.01.2014 By Bal c/d 1,00,000 31.12.2014 To Bal c/fwd 1,26,000 01.02.2014 By Bank
A/c 30,000 Total 1,30,000 Total 1,30,000 C Balance
sheet extract as on Dec 31, 2014 StockHolders Equity Amount Common Stock
1,26,000 Preferred Stock 3,00,000 Additional Paid in Capital for Preferred
stock 15,000 Additional Paid in Capital for Common stock 4,77,000 Retained
Earnings 2,44,500 Total 11,62,500 D Dividend Percentage of
earnings - Payout Ratio A Dividend on common stock 14,500 B Retained
earnings 2,80,000 C Payout Ratio (A/B)*100 5.18 Earnings per share -
Earnings available to equity shareholders divided by total no.of shares A Retained earnings
2,80,000 B Less Dividend on preferred stock -21,000 C Earnings
available to equity shareholders 2,59,000 D Total no.of shares ( 100000/4 =
25000+5000-1000 ) 29,000 E EPS (C/D ) 8.93 F Dividend on common
stock 14,500 G Total Value of common stock 1,26,000 H Return
on Common Stock ( F/G) 11.51%
Solution
A Journal entries for transactions Amount ($) Date Particulars Lf/No Dr Cr Narration
Feb 1, 2014 Bank A/c Dr 30,000 Issued 5,000 shares of common stock for $30,000
To Common Stock A/c 30,000 Mar 20, 2014 Treasury Stock A/c Dr

2. 4,000 Purchased 1,000 additional shares of common treasury stock at $7 per share. Additional
Paid in Capital A/c Dr 3,000 To Bank A/c 7,000 Mar 20, 2014
Common Stock A/c Dr 4,000 Balance adjusted in common stock A/c To Treasury
Stock A/c 4,000 Oct 1, 2014 Dividend A/c Dr 21,000 declared a 7%
cash dividend on preferred stock, payable November 1 = 300000*7% To Dividend Payable
A/c 21,000 Nov 1, 2014 Dividend Payable A/c Dr 21,000 paid the
dividend declared on October 1 To Cash A/c 21,000 Dec 1, 2014 Dividend
A/c Dr 14,500 declared a $0.50 per share cash dividend to common stockholders of record
on December 15, payable December 31, 2014. = (25000(100000/4)+5000-1000) * 0.50 $ To
Dividend Payable A/c 14,500 Dec 31, 2014 Dividend Payable A/c Dr
14,500 Dividend Paid To Cash A/c 14,500 Dec 31, 2014 Retained
Earnings A/c Dr 35,500 entries to close net income and dividends to retained earnings
To Dividend Payable A/c 35,500 B Stockholders equity A/c Dr Cr Date
Particlulars Amount Date Particlulars Amount 20.03.2014 To Treasury Stock A/c 4,000
1.01.2014 By Bal c/d 1,00,000 31.12.2014 To Bal c/fwd 1,26,000 01.02.2014 By Bank
A/c 30,000 Total 1,30,000 Total 1,30,000 C Balance
sheet extract as on Dec 31, 2014 StockHolders Equity Amount Common Stock
1,26,000 Preferred Stock 3,00,000 Additional Paid in Capital for Preferred
stock 15,000 Additional Paid in Capital for Common stock 4,77,000 Retained
Earnings 2,44,500 Total 11,62,500 D Dividend Percentage of
earnings - Payout Ratio A Dividend on common stock 14,500 B Retained
earnings 2,80,000 C Payout Ratio (A/B)*100 5.18 Earnings per share -
Earnings available to equity shareholders divided by total no.of shares A Retained earnings
2,80,000 B Less Dividend on preferred stock -21,000 C Earnings
available to equity shareholders 2,59,000 D Total no.of shares ( 100000/4 =
25000+5000-1000 ) 29,000 E EPS (C/D ) 8.93 F Dividend on common
stock 14,500 G Total Value of common stock 1,26,000 H Return
on Common Stock ( F/G) 11.51%