Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning


Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2021, 300 shares of preferred stock and 4,000 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2021:

March 1 Issue 1,100 shares of common stock for $42 per share.

May 15 Purchase 400 shares of treasury stock for $35 per share.

July 10 Resell 200 shares of treasury stock purchased on May 15 for $40 per share.

October 15 Issue 200 shares of preferred stock for $45 per share.

December 1 Declare a cash dividend on both common and preferred stock of $0.50 per share to all stockholders of record on December 15. Dividends are not paid on treasury stock.

December 31 Pay the cash dividends declared on December 1.

Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2021: Preferred Stock, $300; Common Stock, $40; Additional Paid-in Capital, $76,000; and Retained Earnings, $30,500. Net income for the year ended December 31, 2021, is $10,800.


1. Record each of these transactions.

2. Indicate whether each of these transactions would increase (+), decrease (−), or have no effect (NE) on total assets, total liabilities, and total stockholders’ equity by completing the following chart.

Total Total Total Transaction Assets Liabilities Stockholders' Equity Issue common stock Purchase treasury stock Resell treasury stock Issue preferred stock Declare cash dividends Pay cash dividends

A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...
Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...

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Related Book For  answer-question

Financial Accounting

ISBN: 978-1259914898

5th edition

Authors: David Spiceland, Wayne M. Thomas, Don Herrmann

Question Details
Chapter # 10- Stockholders’ Equity
Section: Problem Set A
Problem: 2
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Question Posted: May 16, 2020 14:10:24