Tony and Suzie purchased land costing $500,000 for a new camp in January 2014. N
ID: 2359648 • Letter: T
Question
Tony and Suzie purchased land costing $500,000 for a new camp in January 2014. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow another million dollars, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They decided to go ahead and sell shares of stock in the company to raise the additional funds for the camp. Great Adventures has two classes of stock authorized: 8%, $10 par preferred, and $1 par value common. When the company began on July 1, 2012, Tony and Suzie each purchased 10,000 shares of $1 par value common stock at $1 per share. The following transactions affect stockholders' equity during 2014, its third year of operations: Jul. 2 Issue an additional 100,000 shares of common stock for $12 per share. Sep. 10 Repurchase 10,000 shares of its own common stock (i.e., treasury stock) for $15 per share. Nov. 15 Reissue 5,000 shares of treasury stock at $16 per share. Dec. 1 Declare a cash dividend on its common stock of $115,000 ($1 per share) to all stockholders of record on Dec. 15 The dividend is payable on December 31.Explanation / Answer
Aug 1
Debit Accounts Receivable 21000
Credit Sales 21000
Aug 3
Debit Purchases 38000
Credit Accounts Payable 38000
Aug 5
Debit Freight In 290
Credit Cash 290
Aug 6
Debit Store Supplies 6360
Credit Accounts Payable 6360
Aug 8
Debit Purchases 36000
Debit Freight In 200 [If Lim Company added the freight to the bill]
Credit Accounts Payable 36200
Aug 12
Debit Accounts Payable 6000
Credit Purchases Returns and Allowances 6000
Aug 15
Debit Accounts Receivable 12000
Credit Sales 12000
Aug 16
Debit Accounts Payable 2000
Credit Store Supplies 2000
Aug 17
Debit Cash 10000
Credit Sales 10000
Aug 18
Debit Sales Returns and Allowances 2000
Credit Accounts Receivable 2000
Aug 24
Debit Accounts Payable 32000 [38000 - 6000 returned]
Credit Cash 32000
Aug 25
Debit Cash 19000
Credit Accounts Receivable 19000 [21000 - 2000 returned]