Reference no: EM132570980

Hat Trick Hockey has two classes of stock authorized: 7%, $20 par value, cumulative preferred and $1 par value common. In 2020, the company experienced cash flow issues and only paid dividends of $45,000.

The following transactions affected stockholders' equity during 2021, its second year of operations:

February 2 February 4 June 15 August 15 November 1

November 30

Required:

• Issues 1 million shares of common stock for $20 per share.
• Issues 50,000 shares of preferred stock for $21 per share.
• Purchases 100,000 shares of its own common stock for $18 per share. Resells 75,000 shares of treasury stock for $23 per share.
• Declares a cash dividend on its common stock of $1 per share and a cash dividend on its preferred stock (7% of par value), payable to all stockholders on record on November 15.
• Pays the dividends declared on November 1.

Question 1. Record each of these transactions.

Question 2. Prepare the stockholders' equity section of the balance sheet as of December 31, 2021. Net income for the year was $3,200,000, and the beginning balance of retained earnings was $2,400,000.