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Chapter 13: Q23E_1 (page 712)

Journalizing issuance of stock and preparing the stockholders’ equity section of the balance sheet

The charter for ASAP-TV, Inc. authorizes the company to issue 100,000 shares of \(5, no-par preferred stock and 500,000 shares of common stock with \)1 par value. During its start-up phase, ASAP-TV completed the following transactions:

Sep. 6 Issued 550 shares of common stock to the promoters who organized the corporation, receiving cash of \(16,500.

12 Issued 400 shares of preferred stock for cash of \)23,000.

14 Issued 1,500 shares of common stock in exchange for land with a market value of $17,000.

Requirements

1. Record the transactions in the general journal.

Short Answer

Expert verified

Cash is debited by $16,500,common stock credited by $550and Paid- in capital in excess of par is credited by $15,950.

Cash is debited by $23,000, preferred stock credited by $2,000and Paid- in capital in excess of par is credited by $21,000.

Land is debited by $17,000, common stock credited by $1,500 andPaid- in capital in excess of par is credited by $15,500.

Step by step solution

01

Basic calculation

CommonStock=NumberofShares×ParValue=550×$1=$550

PreferredStock=NumberofShares×ParValue=400×$5=$2,000

role="math" localid="1656923885502" CommonStockforLand=NumberofShares×ParValue=1,500×$1=$1,500

02

Journal entries

Date

Transaction

Debit

Credit

Sep 6

Cash

$16,500

Common stock

$550

Paid- in capital in excess of par

$15,950

To record issue of common stock

Sep 12

Cash

$23,000

Preferred stock

$2,000

Paid- in capital in excess of par

$21,000

To record issue of preferred stock

Sep 14

Land

$17,000

Common stock

$1,500

Paid- in capital in excess of par

$15,500

To record issue of common stock in exchange of asset

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Most popular questions from this chapter

Computing earnings per share, price/earnings ratio, and rate of return on common stockholders’ equity

Gullo Company reported these figures for 2018 and 2017:

2018 2017

Income Statement—partial:

Net Income \( 18,900 \) 24,000

Dec. 31, 2018 Dec. 31, 2017

Balance Sheet—partial:

Total Assets \( 285,000 \) 200,000

Paid-In Capital:

Preferred Stock—11%, \(9 Par Value; 60,000 sharesauthorized, 10,000 shares issued and outstanding\) 90,000 \( 90,000

Common Stock—\)1 Par Value; 45,000 sharesauthorized, 30,000 shares issued and outstanding

30,000 30,000

Paid-In Capital in Excess of Par—Common 14,000 14,000

Retained Earnings 51,000 42,000

Total Stockholders’ Equity \( 185,000 \) 176,000

Learning Objectives 3, 4, 6

2. Retained Earnings Dec. 31,

2018 \(218,280

Requirements

1. Compute Gullo Company’s earnings per share for 2018. Assume the company paid the minimum preferred dividend during 2018. Round to the nearest cent.

2. Compute Gullo Company’s price/earnings ratio for 2018. Assume the company’s market price per share of common stock is \)9. Round to two decimals.

3. Compute Gullo Company’s rate of return on common stockholders’ equity for 2018. Assume the company paid the minimum preferred dividend during 2018. Round to the nearest whole percent.

Question - Describing corporation characteristics

Due to recent beef recalls, Southwest Steakhouse is considering incorporating. Bob, the owner, wants to protect his personal assets in the event the restaurant is sued.

Requirements

1. Which advantage of incorporating is most applicable? What are other advantages of organizing as a corporate entity?

Reporting earnings per share

Return to the ABC data in Short Exercise S13-12. ABC had 8,000 shares of common stock outstanding during 2018. ABC declared and paid preferred dividends of $4,000 during 2018.

Show how ABC reports EPS data on its 2018 income statement.

Computing earnings per share, price/earnings ratio, and rate of return on common stockholders’ equity

Bianchi Company reported these figures for 2018 and 2017:

2018 2017

Income Statement—partial:

Net Income \( 34,380 \) 18,000

Dec. 31, 2018 Dec. 31, 2017

Balance Sheet—partial:

Total Assets \( 285,000 \) 280,000

Paid-In Capital:

Preferred Stock—11%, \(9 Par Value; 60,000 shares

authorized, 12,000 shares issued and outstanding

\) 108,000 \( 108,000

Common Stock—\)2 Par Value; 60,000 shares

authorized, 50,000 shares issued and outstanding

100,000 100,000

Paid-In Capital in Excess of Par—Common 14,000 14,000

Retained Earnings 60,500 38,000

Total Stockholders’ Equity \( 282,500 \) 260,000

Requirements

1. Compute Bianchi Company’s earnings per share for 2018. Assume the company paid the minimum preferred dividend during 2018. Round to the nearest cent.

Journalizing treasury stock transactions and reporting stockholders’ equity

Southern Amusements Corporation had the following stockholders’ equity on

November 30:

Paid-In Capital:

Common Stock—\(5 Par Value; 1,300 sharesauthorized, 250 shares issued and outstanding1,250

Retained Earnings50,000

Total Stockholders’ Equity \) 55,000

Stockholders’ Equity

Paid-In Capital in Excess of Par—Common 3,750

Total Paid-In Capital

\(5,000

On December 30, Southern purchased 200 shares of treasury stock at \)15 per share.

Requirements

3. How many shares of common stock are outstanding after the purchase oftreasury stock?
See all solutions

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