Comprehensive The shareholders' equity section of SuperiorCorporation's balance sheet as of December 31, 2012, is as follows:Shareholdersâ Equity Preferred stock, $100 par value; authorized,150,000 shares; issued, 15,000 shares $1,500,000 Common stock, $5par value; authorized, 1,000,000 shares; issued, 200,000 shares1,000,000 Paid-in capital in excess of parâpreferred 75,000 Paid-incapital in excess of parâcommon 425,000 Retained earnings 3,000,000$6,000,000 The following events occurred during 2013: Jan. 5 10,000shares of authorized and unissued common stock were sold for $10per share. Jan. 16 10,000 shares of authorized and unissuedpreferred stock were sold for $108 per share. April 1 80,000 sharesof common stock were repurchased for the treasury at a price of $15per share. Superior uses the cost method to account for treasurystock. Sept. 1 4,000 shares of preferred stock are issued inexchange for a piece of land. The land has an appraised value of$439,000. The preferred stock currently trades on the New YorkStock exchange at a price of $108 per share. Dec. 1 30,000 sharesof treasury stock are reissued at a price of $20 per shareRequired: Hide 1. Prepare journal entries for each of the abovetransactions. For a compound transaction, if an amount box does notrequire an entry, leave it blank. Jan. 5 Cash 100,000 Common Stock50,000 Additional Paid-in Capital on Common Stock 50,000 Jan. 16Cash 1,080,000 Preferred Stock 1,000,000 Additional Paid-in Capitalon Preferred Stock 80,000 April 1 Treasury Stock 1,200,000 Cash1,200,000 Sept. 1 Land 432,000 Preferred Stock 400,000 AdditionalPaid-in Capital on Preferred Stock 32,000 Dec. 1 Cash 600,000Treasury Stock 450,000 Additional Paid-in Capital on Treasury Stock150,000 Hide Feedback Correct Check My Work Feedback When a companyissues common (or preferred) stock for cash, you should record thetotal par value (Number of Shares x Par Value per Share) in theCommon (or Preferred) Stock account, with any excess recorded asAdditional Paid-in Capital. Under the cost method, when thecorporation reacquires its capital stock you should debit anaccount entitled Treasury Stock (and credit Cash or otherappropriate asset accounts) for the cost paid to reacquire theshares. When the corporation reissues the treasury shares, youshould reduce (credit) the Treasury Stock account for the cost ofthe shares reissued and record the difference between the cashreceived and the cost of the reissued shares as an adjustment ofshareholders' equity. If the cash received exceeds the cost of thereissued treasury stock, you should record the excess as anincrease in additional paid-in capital from treasury stock. If thecash is less than the cost, you should record the "deficit" as areduction of additional paid-in capital from treasury stock. If theadditional paid-in capital from treasury stock is insufficient toabsorb the deficit, you should record the remainder as a reductionin retained earnings. If a company issues capital stock forservices or assets other than cash, you should record thetransaction at the fair value of the stock issued or the noncashconsideration received, whichever is more representationallyfaithful. 2. Calculate the number of authorized, issued, andoutstanding common shares as of December 31, 2013. Authorizedcommon shares: 1,000,000 shares Issued shares: 210,000 sharesOutstanding shares: 160,000 shares Hide Feedback Correct Check MyWork Feedback Authorized capital stock is the number of shares ofcapital stock (both preferred and common) that a corporation mayissue as stated in its corporate charter. Issued capital stock isthe number of shares of capital stock that a corporation has issuedto its shareholders as of a specific date. Outstanding capitalstock is the number of shares of capital stock that a corporationhas issued to shareholders and that are still being held byshareholders as of a specific date. 3. Calculate Superior's legalcapital at December 31, 2013.
