Incentive Corporation was organized in 2009 to operate a financial consulting bu
ID: 2368323 • Letter: I
Question
Incentive Corporation was organized in 2009 to operate a financial consulting business. The charter authorized the following capital stock: common stock, par value $8 per share, 12,500 shares. During the first year, the following selected transactions were completed: a. Issued 7,100 shares of common stock for cash at $21 per share. b. Issued 1,900 shares of common stock for cash at $27 per share. Requirement 1: Show the effects of each transaction on the accounting equation Give the journal entry required for each of these transactions Requirement 3: Prepare the stockholders' equity section as it should be reported on the 2009 year-end balance sheet. At year-end, the accounts reflected a profit of $450.Explanation / Answer
1. Show the effects of each transaction on the accounting equation. Accounting equation: Assets = Liabilities + Equity a. Issued 6,000 shares of common stock for cash at $20 per share. Assets increase $120,000 = Liabilities no change + Equity increase $120,000 b. Issued 2,000 shares of common stock for cash at $23 per share. Assets increase $46,000 = Liabilities no change + Equity increase $46,000 2. Give the journal entry required for each of these transactions. a. Issued 6,000 shares of common stock for cash at $20 per share. Dr Cash $120,000 Cr Common stock $24,000 (6,000 shares at par) Cr Paid-in capital in excess of par $96,000 b. Issued 2,000 shares of common stock for cash at $23 per share Dr Cash $46,000 Cr Common stock $8,000 (2,000 shares at par) Cr Paid-in capital in excess of par $38,000 3. Prepare the stockholders