Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2021, 300 shares of preferred stock and 4,000 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2021: March 1 Issue 1,100 shares of common stock for $42 per share. May 15 Purchase 400 shares of treasury stock for $35 per share. July 10 Resell 200 shares of treasury stock purchased on May 15 for $40 per share. October 15 Issue 200 shares of preferred stock for $45 per share. December 1 Declare a cash dividend on both common and preferred stock of $0.50 per share to all stockholders of record on December 15. (Hint: Dividends are not paid on treasury stock.) December 31 Pay the cash dividends declared on December 1. Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2021: Preferred Stock, $300; Common Stock, $40; Additional Paid-in Capital, $76,000; and Retained Earnings, $30,500. Net income for the year ended December 31, 2021, is $10,800. 1. Record each of these transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.) Record the issuance of 1,100 shares of common stock for $42 per share. Record the purchase of 400 shares of treasury stock for $35 per share. Record the resell 200 shares of treasury stock purchased on May 15 for $40 per share. Record the issuance of 200 shares of preferred stock for $45 per share. Record the declaration of a cash dividend on both common and preferred stock of $0.50 per share to all stockholders. (Hint: Dividends are not paid on treasury stock.) Record the entry on December 15. Record the cash dividends declared on December 1.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2021, 300 shares of preferred stock and 4,000 shares of common stock have been issued. The following transactions affect
| March | 1 | Issue 1,100 shares of common stock for $42 per share. | ||
| May | 15 | Purchase 400 shares of |
||
| July | 10 | Resell 200 shares of treasury stock purchased on May 15 for $40 per share. | ||
| October | 15 | Issue 200 shares of preferred stock for $45 per share. | ||
| December | 1 | Declare a cash dividend on both common and preferred stock of $0.50 per share to all stockholders of record on December 15. (Hint: Dividends are not paid on treasury stock.) | ||
| December | 31 | Pay the cash dividends declared on December 1. |
Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2021: Preferred Stock, $300; Common Stock, $40; Additional Paid-in Capital, $76,000; and
1. Record each of these transactions. (If no entry is required for a particular transaction/event, select "No
Record the issuance of 1,100 shares of common stock for $42 per share.
Record the purchase of 400 shares of treasury stock for $35 per share.
Record the resell 200 shares of treasury stock purchased on May 15 for $40 per share.
Record the issuance of 200 shares of preferred stock for $45 per share.
Record the declaration of a cash dividend on both common and preferred stock of $0.50 per share to all stockholders. (Hint: Dividends are not paid on treasury stock.)
Record the entry on December 15.
Record the cash dividends declared on December 1.
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