Tony and Suzie purchased land costing $500,000 for a new camp in January 2017. N
ID: 2477003 • Letter: T
Question
Tony and Suzie purchased land costing $500,000 for a new camp in January 2017. 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, 2015, 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 2017, its third year of operations:
Jul. 2 - Issue an additional 100,000 shares of common stock for $9 per share.
Sep. 10 - Repurchase 10,000 shares of its own common stock (i.e., treasury stock) for $12 per share.
Nov. 15 Reissue 5,000 shares of treasury stock at $13 per share.
Dec. 1 Declare a cash dividend on its common stock of $115,000 ($1 per share) to all stockholders of record on December 15.
Dec. 31 Pay the cash dividend declared on Dec. 1.
1. Record each of these transactions. (COMPLETED??)
2. Great Adventures has net income of $156,000 in 2017. Retained earnings at the beginning of 2017 was $146,000. Prepare the stockholders’ equity section of the balance sheet for Great Adventures as of December 31, 2017.
Explanation / Answer
Date Account Title and Explanations Debit Credit 2-Jul Cash 900000 Common Stock, 1$ par 100000 Paid in capital in excess of par - common stock 800000 10-Sep Treasury stock 120000 Cash 120000 15-Nov Cash 65000 Treasury stock 60000 Paid in capital in excess of par-Treasury stock 5000 1-Dec Retained earnings 115000 Dividends payable 115000 31-Dec Dividends payable 115000 Cash 115000