In 2017 The Redsox Inc Was Formed The Corporate Charter Authorizes 1 000 000 Shares 2844524

In 2017, the Redsox Inc. was formed. The corporate charter authorizes 1,000,000 shares of $5 par value, noncumulative, nonparticipating preferred stock, and issuance of 5,000,000 shares of common stock carrying a $1 par value. Balance sheets are prepared quarterly.

On January 2, 2018, all 1,000,000 shares of preferred stock are issued at $20 per share. Also on January 2, 3,000,000 shares of the common stock are issued in exchange for cash at an average price of $10 per share. Net income for the first quarter was $1,000,000.

During the 2nd and 3rd quarters, the Redsox Inc. participated in three treasury stock transactions:


the firm reacquires 200,000 shares for the treasury at a price of $12 per share


50,000 treasury shares are reissued at $15 per share


50,000 treasury shares are reissued at $10 per share.

Net income for the second and third quarter was $3,000,000 in total.

On October 15, 2018, Board of Directors approves a 2-for-1 stock split to replace its $1 par value common stock with a new common stock issue having a $0.50 par value. That is, the shareholders will receive two shares of the $0.50 par stock in exchange for each share of the $1 par stock they own. The $1 par stock will be collected and destroyed.

On November 5, 2018, the Redsox Corporation declares a $0.05 per share cash dividend on common stock and a $0.25 per share cash dividend on preferred stock. Payment is scheduled for December 1, 2018, to shareholders of record on November 15, 2018.

On December 14, 2018, the Redsox Corporation declares and issues a 1% stock dividend. At the date of declaration, the common stock was selling in the open market at $10 per share.

Net income for the fourth quarter was $2,000,000.


1. Prepare journal entries for stock related transactions (i.e., issuance, repurchase, and dividends).

2. Prepare the December 31, 2018, shareholders’ equity section of the balance sheet for the Redsox Corporation.



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