Classic Sales Corp. (CSC) is authorized to issue 3,750,000 shares of $5.00 par c
ID: 2451674 • Letter: C
Question
Classic Sales Corp. (CSC) is authorized to issue 3,750,000 shares of $5.00 par common stock. In its initial public offering (IPO) during January, 2014, CSC issued 360,000 shares of its $5.00 par common stock for $5.50 per share. Over the next two years (through 2015). CSC's stock price increased, and the company issued 400.000 more shares at an average price of $9.50. Early in 2016, the price of CSC's common stock dropped to $7.50, and CSC purchased 59.000 shares of its common stock for the treasury. After the market price of the common stock rose later in the year. CSC sold 45,000 shares of the treasury stock for $10.00 per share. During the years 2014 through 2017, CSC canted net income of $940,000 and declared and paid cash dividends of S245,000. Stock dividends of $441,630 were distributed to shareholders in 2017, with $315,450 credited to common stock and $126,180 credited to additional paid-in capital. At December 31, 2017, total assets of the company are $14,500,000 and liabilities add up to $8,017,500. First write all journal entries for the above transactions. Gather totals in T-accounts for all stockholders' equity accounts. Prepare the stockholders' equity section of the balance sheet as of December 31,2017. Show on a separate sheet of paper how each amount was calculated. Then answer these questions: Exclude the treasury stock transactions from this calculation and include all other common stock transactions. What was the average issue price of this stock? Net income for year 2017 was $340,000. Based on the number of shares of stock outstanding year-end, calculate earnings per share (EPS):Explanation / Answer
Entry in January Cash/Bank A/c 1980000 To Common Stock A/c 1800000 To Excess above in-par A/c 180000 Later Periods Cash/Bank A/c 3800000 To Additional Paid-in Capital A/c 2000000 To Excess above in-par A/c 1800000 Early in 2016 Treasury Stock Investment A/c DR 442500 To Cash/Bank A/c 442500 Cash/Bank A/c DR 450000 To Treasury Stock Investment A/c 337500 To Profit on Sale A/c 112500 In 2017 Cash Dividends A/c DR 245000 To Profit and Loss A/c 245000 Stock Dividend A/c DR 441630 To Common Stock A/c 315450 To Additional Paid-in Capital A/c 126180 Common Stock A/c Additional Paid in Capital A/c By Cash/Bank A/c 1800000 By Cash/Bank A/c 2000000 By Stock Dividend A/c 315450 By Stock Dividend A/c 126180 Stockholders' Equity Section in Balance Sheet as on 31 December 2017 Authorised Capital 3,750,000 shares of common stock @ $5 per share 18750000 Issued, Subscribed and Paid-Up 360,000 shares of common stock @ 5 per share 1800000 Share Premium of $ 0.50 per share 180000 1980000 400,000 shares of common stock @ 5 per share 2000000 Share Premium of $ 4.50 per share 1800000 3800000 5780000 1. Total Share Capital as shown above 5780000 No. of shares issued till now 760000 Share Price/share in $ 7.61 $ per share 2. Net Income for 2017 is $ 340,000 No. of shares issued till now is 760,000 Hence, the bifrucation of the income will be as under : No. of shares Net Income in $ Common Stock 360000 161052.6 Additional Paid-in Capital 400000 178947.4 760000 340000