Week 2 – Team Assignment

P15-1 (Equity Transactions and Statement Preparation) On January 5, 2015, Drabek Corporation received a charter granting the right to issue 5,000 shares of $100 par value, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of $5 par value common stock. It then completed these transactions.

• Jan. 11
  **Issued 20,000 shares of common stock at $16 per share.
  Cash               $320,000
  Common Stock       $
  Additional paid-in capital   $
  
  
• • Feb. 1
    **issued to Robb Nen Corp. 4,000 shares of preferred stock for the following assets:
    machinery with a fair market value of $50,000;
    a factory building with a fair market value of $110,000;
    and land with an appraised value of $270,000.
  • • July 29
      **Purchased 1,800 shares of common stock at $19 per share. (Use cost method.)

   

  • Aug. 10
    **Sold the 1,800 treasury shares at $14 per share.
    Aug 10
          Cash              252,000
          Treasury stock:             $252,000
    (To record the sale of 1,800 treasury shares at $14 per share)
  • • Dec. 31
      **Declared a $0.25 per share cash dividend on the common stock and declared the preferred dividend.
      Preferred dividend (50,000 x $.25 per Share)    $12,500
      Common dividend (remainder: $50,000 - $12,500) $37,500
      Total dividend:                                 $50,000
  • • Dec. 31
      **Closed the Income Summary account. There was a $175,700 net income.
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    • Instructions

      (a) Record the journal entries for the transactions listed above.

      (b) Prepare the stockholders’ equity section of Drabek Corporation’s balance sheet as of December 31, 2007.