What are the entries in the General Books and Stock Books for the above transactions? In the General Books the entry to reduce Capital Stock would be: The Capital Stock having been reduced, the old certificates of stock must be taken up, and new certificates issued to the stockholders for the stock still owned by each. Debit each stockholder in the Stock Ledger for the shares surrendered. If the Capital Stock is reduced and the shareholders are to receive the par value in cash, the entry would be : Capital Stock To Cash. Suppose there is Treasury Stock unsubscribed amounting to $50,000, and it is desired to reduce the Capital Stock for the amount of the Treasury Stock, the entry would be :— Capital Stock To Treasury Stock. Again, suppose that the Capital Stock is to be reduced, and the stockholders are paid a part in cash, what would be the entry when the certificates are surrendered? After reducing the Capital Stock as shown above, the company find at the end of another year that practically they have not gained anything or lost anything, and to provide more Working capital they decide to issue $250,000 of Preferred Stock. The conditions are that the Preferred Stock shall receive an annual Dividend of 6% of the profits of the company before any Dividend shall be declared on the Common Stock. After declaring the Dividend of 6% on the Preferred, should there remain a sufficient gain to declare a Dividend on the Common Stock and Preferred Stock of 3% or more, then such Dividend should be declared; but should the gain be less than 3% it should remain to the credit of Surplus or Reserve Fund until auother Preferred Dividend is made. Should the profits not equal a 6% Dividend, the same should be declared on the Preferred Stock as far as possible, or rather at as high a rate as possible. The above resolutions are in accordance with law. Preferred Stock receives Dividends first; then, if anything remains, another Dividend is declared for the balance of the gain on all the stock, Preferred and Common. As de cided by the stockholders, $250,000 Preferred Stock was placed in the market. What entry? To Preferred Capital Stock........ $250,000.00 Or if this stock was subscribed and paid for in cash, then : Cash... $250,000.00 To Preferred Capital Stock.......... $250,000.00 In the Stock Ledger Debit Preferred Capital Stock and Credit the Stockholders for the same, showing clearly that it is Preferred Stock. If a stockholder has Preferred and Common Stock, open up an account in Stock Ledger with him for each stock separately. To declare a Dividend on the Preferred Stock, the Journal entry would be : Surplus To Preferred Stock Dividend No. 1, 1894, etc. To declare a General Dividend on Preferred and Common Stock, the entry would be : Surplus To Preferred Stock Dividend No. 1, 1894. NOTE.-The Stock Certificates for Preferred Stock would be so marked. Preferred Stock is to be preferred to Common Stock, but Guaranteed Stock is the most valuable, because a certain Dividend or Interest is guaranteed by the company, while on Preferred and Common if there is any gain you get, if there is no gain you get nothing. CHAPTER FOURTEEN. A Limited Wholesale Grocery Company. Ex. 263. Wm. Edwards has been conducting a Wholesale Grocery, and has this day formed a Limited Partnership Company, with a Capital Stock of $250,000, 2500 shares, par value $100. The corporate name is The Wm. Edwards Grocery Company, Limited, Wm. Edwards subscribed for 1500 shares....... $150,000.00 The Assets and Liabilities of Wm. Edwards, as shown by his books and inventory, are as follows: Cash ...... Mdse. (Inventory). Bills Rec........ : ASSETS. $51,500.00 132,000.00 30,000.00 Wm. Edwards pays for his stock out of the assets of his former business as follows: Mdse. $100,000, store fixtures $2100, Bills Receivable (which he guarantees) $30,000, and Cash $17,900. What entry? Mdse...... $250,000.00 $250,000.00 $100,000.00 The other subscribers pay for their stock as follows: J. D. Boyd, 500 shares Union National Bank stock, par value $100, $50,000; H. A. Jones deeds a four-story brick block on Water Street, $10,000; C. J. Thomas gives his Note in favor of the company at four months, $20,000; S. S. West pays cash, $20,000. What entry? Union National Bank Stock.. $50,000.00 Had all the stock been paid for at the time of incorporating, the following entry would be correct also: The new company have purchased from Mr. Edwards the balance of merchandise belonging to him, on account, which amounts to $32,000. It is also agreed that the new company shall collect all accounts, and credit Wm. Edwards, and that they shall also pay all personal accounts and Bills Payable, and charge Wm. Edwards for the same. Journal entry to buy the stock of Mdse. belonging to Wm. Edwards : Mdse.. To Wm. Edwards..... (Full history.) $32,000.00 $32,000.00 When any of the personal accounts or Bills Payable of the old house of Wm. Edwards are paid by the new company, enter the same in the books of Wm. Edwards, and at the same time Debit Wm. Edwards and Credit Cash in the books of the company. When any of the personal accounts or Bills Receivable of the old firm are collected by the company, enter the same in the books of the old firm. and at the same time Debit Cash and Credit Wm. Edwards in the books of the company. A Manufacturing Company. Ex. 264. Single Entry Stock Books Changed to Double Entry and a Stock Dividend Declared. The Cleveland Manufacturing Co., Limited, was organized Jan. 1st, 1893, with a Capital Stock of $25,000, 250 shares, par value $100. The Capital Stock paid up is $20,000, and is held by the following named parties: C. C. Dewstoe, 50 shares, $5000; S. W. Burrows, 45 shares, $4500; L. M. Southern, 54% shares, $5450; W. H. Van Tine, 50% shares, $5050. Fifty shares are held as Treasury Stock. Jan. 1st, 1894, the company decided to open a new set of books, to be kept by Double Entry, close the old Single Entry books, and declare a Stock Dividend equal to the unsold Treasury Stock, and issue the same to the stockholders in proportion to the stock held by each. Statement of Assets and Liabilities Taken Dec. 31, 1893. The above statement determines the net gain for the year. The following Journal Entry is made to open the books by Double Entry: |