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On January 5, 2020, Sheffield Corporation received a charter granting the right to issue 5,100 shares of $100 par value, 7% cumulative and nonparticipating preferred stock, and 51,600 shares of $10 par value common stock. It then completed these transactions. Jan. 11 Issued 19,500 shares of common stock at $15 per share. Feb. 1 Issued to Sanchez Corp. 4,100 shares of preferred stock for the following assets: equipment with a fair value of $53,300; a factory building with a fair value of $152,000; and land with an appraised value of $295,000. July 29 Purchased 1,600 shares of common stock at $16 per share. (Use cost method.) Aug. 10 Sold the 1,600 treasury shares at $14 per share. Dec. 31 Declared a $0.35 per share cash dividend on the common stock and declared the preferred dividend. Dec. 31 Closed the Income Summary account. There was a $158,400 net income.Instructions: Record the journal entries for the transactions listed above. Prepare the stockholders' equity section of Phelps Corporation's balance sheet as of December 31, 2010.

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Answer:

 Sheffield Corporation

Journal Entries

Date             Description                              DR                           CR

Jan 11         Cash                                       292,500

                 Common stock                                                     195,000

                 Paid in Capital for common stock                         97,500

               

              Being the amount received on issue of

             

Feb 11     Equipment                                   53,300

              Factory Building                          152,000

              Land                                             295,000

             Prefereed stock                                                     410,000

             Paid -in -capital for Preferred stock                        90,300

July 29   Treasury stock                              25,600

              Cash                                                                            25,600

            Being the payment of own share purchased

Aug 10    Cash                                                   22,400

                Retained Earnings                               3,200

               Treasury stock                                                      25,600

 

Dec 31       Retained  earnings                              10,025

                 Dividend(0.35*19500)                                            6,825  

                 Treasury stock                                                         3,200  

Dec 31       Net Income ( Income Summary)      158,400

                  Retained Earnings                                               158,400

Balance sheet as at Dec 31

Equity

Common stock at $10 par value                                      $195,000

7% Preferred Stock                                                            410,000

Paid in capital for common stock                                        97,500

Paid in capital for Preferred stock                                        90,300

Retained Earnings ( 158,400-6825-3200)                         148,375

                                                                                               941,175

Explanation:

abiolataiwo2015

Based on the information given the appropriate journal entries to record the given transactions are:

Sheffield Corporation journal entries

Jan 11        

Debit Cash  $292,500

(19,500×$15)

Credit Common stock     $195,000

Credit Paid in capital in excess of par value-Common Stock $97,500

($292,500-$195,000)

Feb 1

Debit  Equipment     $53,300                    

Debit Factory Building      $152,000

Debit Land $295,000      

Credit  Preferred stock        $410,000        

(4,100×$100)                                

Credit Paid in capital in excess of par value-preferred stock $90,300

($53,300+ $152,000+ $295,000-$410,000)        

July 29

Debit Treasury stock $25,600

(1,600×$16)  

Credit Cash  $25,600

Aug 10

Debit Cash    $22,400

(1,600×$14)                                

Credit Retained Earnings    $3,200

[($16-$14)×  1,600]

Credit Treasury stock  $25,600

(1,600×$16)

Dec 31

Debit Dividend $6,825

(0.35×19,500)                      

Credit Dividend payable $6,825

Dec 31

Debit Income summary $158,400

Credit Retained earnings $158,400

b. Stockholders' equity section of Phelps Corporation's balance sheet as of December 31, 2010

Common stock at $10 par value                                      $195,000

7% Preferred Stock                                                           $410,000

Paid in capital for common stock                                     $97,500

Paid in capital for Preferred stock                                    $90,300

Retained Earnings                                                              $148,375                   ($158,400-$6,825-$3,200)      

Stockholders' equity                                                          $941,175                 

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