Equity transactions.Foley Corporation has the following capital structure at the beginning of the year: 6% Preferred stock, $50 par value, 20,000 shares authorized,
6,000 shares issued and outstanding $ 300,000
Common stock, $10 par value, 60,000 shares authorized,
40,000 shares issued and outstanding 400,000
Paid-in capital in excess of par 110,000
Total paid-in capital 810,000
Retained earnings 440,000
Total stockholders' equity $1,250,000
Instructions:
(a) Record the following transactions which occurred consecutively (show all calculations).
1. A total cash dividend of $90,000 was declared and payable to stockholders of record. Record dividends payable on common and preferred stock in separate accounts.
2. A 10% common stock dividend was declared. The average market value of the common stock is $18 a share.
3. Assume that net income for the year was $150,000 (record the closing entry) and the board of directors appropriated $70,000 of retained earnings for plant expansion.
(b) Construct the stockholders' equity section incorporating all the above information.