1.
To record: The each transaction.
1.
Explanation of Solution
Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.
Par value: It refers to the value of a stock that is stated by the corporation’s charter. It is also known as face value of a stock.
Cash dividends: The amount of cash provided by a corporation out of its distributable profits to its shareholders as a return for the amount invested by them is referred as cash dividends.
Prepare the
Date | Account Title and Explanation | Debit ($) | Credit($) |
2020 | |||
July 2 | Cash
| 1,200,000 | |
Common stock
| 100,000 | ||
Additional paid in capital (difference) | 1,100,000 | ||
(To record issuance of 100,000 shares of common stock for $12 per share) | |||
September 10 | Treasury stock
| 150,000 | |
Cash | 150,000 | ||
(To record the purchase of 10,000 shares of treasury stock) | |||
November 15 | Cash
| 80,000 | |
Treasury stock
| 75,000 | ||
Additional paid in capital(difference) | 5,000 | ||
(To record the reissue of treasury stock above the cost) | |||
December 1 | Dividends | 115,000 | |
Dividends Payable | 115,000 | ||
(To record the declaration of cash dividend) | |||
December 31 | Dividends Payable | 115,000 | |
Cash | 115,000 | ||
(To record the payment of cash dividend) |
Table (1)
2.
To prepare: The
2.
Explanation of Solution
Stockholders’ Equity Section: It is refers to the section of the balance sheet that shows the available balance of each stockholder’s equity account as on reported date at the end of the financial year.
Prepare the stockholders’ equity section of the balance sheet for G Adventures as of December 31, 2020 as follows:
G Adventures | ||
Balance sheet (Partial) | ||
Stockholders’ Equity Section | Amount ($) | Amount ($) |
Paid-in Capital: | ||
Common stock, $1 par value, 120,000 shares issued | 120,000 | |
Additional paid-in capital: | ||
Paid-in capital – excess over par value, common stock | 1,100,000(1) | |
Paid-in capital – excess over par value, Treasury stock | 5,000(2) | 1,105,000 |
Total paid-in capital | 1,225,000 | |
175,000(4) | ||
Treasury stock, 5,500 shares | (75,000) (3) | |
Total stockholders’ equity | 1,325,000 |
Working note:
Compute paid in capital in excess of par for common stock:
Compute paid in capital in excess of par for treasury stock:
Compute the par value of 5,500 treasury stock:
Compute the amount of retained earnings:
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Chapter 10 Solutions
Financial Accounting
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