Corporations and equity: journal entry worksheet
Name: Date:
Convention: United States (US textbooks)
Record each transaction as a journal entry: write each account in the Debit or the Credit column with its amount.
Issuing common stock above par
A corporation issues 4000 shares of common stock with a par value of $5.00 per share at $12.50 per share. The buyers pay the full price in cash.
Assumptions: Issue costs are ignored.
Accounts to choose from: Owner’s Capital · Notes Payable · Cash · Paid-in Capital in Excess of Par—Common Stock · Common Stock · Accounts Receivable · Retained Earnings
Account Debit Credit Declaring a cash dividend
The board of directors declares a cash dividend of $30,000.00, to be paid to the stockholders next month. Record the declaration.
Assumptions: Only the declaration is recorded here; the payment is a separate entry.
Accounts to choose from: Treasury Stock · Dividends · Cash · Accounts Payable · Retained Earnings · Dividends Payable · Common Stock
Account Debit Credit Paying a declared dividend
Last month the board of directors declared a cash dividend of $30,000.00. Today, the payment date, the corporation pays it in cash.
Assumptions: The dividend was recorded when it was declared.
Accounts to choose from: Cash · Salaries Payable · Retained Earnings · Dividends Payable · Dividends · Accounts Payable
Account Debit Credit Buying treasury stock
A corporation buys back 400 shares of its own common stock (par value $5.00) at $18.00 per share in cash, to hold them as treasury stock.
Assumptions: Cost method: treasury stock is recorded at what it cost. Brokerage fees are ignored.
Accounts to choose from: Common Stock · Cash · Treasury Stock · Paid-in Capital in Excess of Par—Common Stock · Retained Earnings · Dividends
Account Debit Credit Declaring and paying a dividend the same day
The board of directors of a small, closely held corporation declares a cash dividend of $15,000.00 and pays it in cash the same day.
Assumptions: One entry records the declaration and the payment.
Accounts to choose from: Cash · Interest Expense · Retained Earnings · Dividends · Common Stock · Dividends Payable · Accounts Payable
Account Debit Credit Converting a loan into shares
A corporation owes $60,000.00 on a long-term note payable to a private investor. They agree that the corporation settles the whole note by issuing 4000 shares of common stock with a par value of $5.00 per share to the investor. Record the conversion.
Assumptions: No interest is owed, and the stock issued is worth exactly the carrying amount of the note, so there is no gain or loss on settling it. Costs are ignored.
Accounts to choose from: Retained Earnings · Paid-in Capital in Excess of Par—Common Stock · Cash · Interest Expense · Notes Payable · Accounts Payable · Common Stock
Account Debit Credit Closing a corporation’s net income to Retained Earnings
On December 31, after the revenue and expense accounts have been closed, a corporation’s Income Summary has a credit balance of $74,500.00. Close Income Summary to Retained Earnings.
Assumptions: In a US corporation, net income is closed to Retained Earnings at year end; there is no separate appropriation entry after the shareholders’ meeting.
Accounts to choose from: Cash · Owner’s Capital · Retained Earnings · Paid-in Capital in Excess of Par—Common Stock · Common Stock · Income Summary
Account Debit Credit Closing a corporation’s net loss to Retained Earnings
On December 31, after the revenue and expense accounts have been closed, a corporation’s Income Summary has a debit balance of $23,600.00. Close Income Summary to Retained Earnings.
Assumptions: In a US corporation, a net loss is closed to Retained Earnings at year end; there is no separate entry after the shareholders’ meeting.
Accounts to choose from: Income Summary · Paid-in Capital in Excess of Par—Common Stock · Common Stock · Retained Earnings · Owner’s Capital · Cash
Account Debit Credit Issuing common stock in exchange for land
A corporation issues 5000 shares of common stock with a par value of $10.00 per share to an investor in exchange for a plot of land. The land’s fair value is $90,000.00.
Assumptions: The land’s fair value is the best measure of what the stock is worth. Costs are ignored.
Accounts to choose from: Buildings · Land · Notes Payable · Common Stock · Paid-in Capital in Excess of Par—Common Stock · Cash · Retained Earnings
Account Debit Credit
Not in this convention: Allocating profit to the legal reserve
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