Reference no: EM131967296

Question 1

Indigo Company reported the following amounts in the stockholders' equity section of its December 31, 2016, balance sheet.

Preferred stock, 10%, $100 par (10,000 shares authorized, 2,100 shares issued) $210,000
Common stock, $5 par (92,500 shares authorized, 18,500 shares issued) 92,500
Additional paid-in capital 132,000
Retained earnings 434,000
Total $868,500

During 2017, Indigo took part in the following transactions concerning stockholders' equity.

1. Paid the annual 2016 $10 per share dividend on preferred stock and a $2 per share dividend on common stock. These dividends had been declared on December 31, 2016.

2. Purchased 1,800 shares of its own outstanding common stock for $40 per share. Indigo uses the cost method.

3. Reissued 600 treasury shares for land valued at $30,200.

4. Issued 530 shares of preferred stock at $106 per share.

5. Declared a 10% stock dividend on the outstanding common stock when the stock is selling for $47 per share.

6. Issued the stock dividend.

7. Declared the annual 2017 $10 per share dividend on preferred stock and the $2 per share dividend on common stock. These dividends are payable in 2018.

Prepare journal entries to record the transactions described above.

Prepare the December 31, 2017, stockholders' equity section. Assume 2017 net income was $321,000.