May I get step by step approach on the following question. I need help on (b). B
ID: 2575929 • Letter: M
Question
May I get step by step approach on the following question. I need help on (b). But could you please check the accuracy for my answers in (a)? Please know the "Answer" areas are supposed to be blank and supposed to be filled in. Thank you for your time.
Identifying and Analyzing Financial Statement Effects of Stock Transactions
The stockholders' equity of Verrecchia Company at December 31, 2011, follows:
During 2012, the following transactions occurred:
Jan. 5 Issued 10,000 shares of common stock for $12 cash per share.
Jan. 18 Purchased 4,000 shares of common stock for the treasury at $14 cash per share.
Mar. 12 Sold one-fourth of the treasury shares acquired January 18 for $17 cash per share.
July 17 Sold 500 shares of the remaining treasury stock for $13 cash per share.
Oct. 1 Issued 5,000 shares of 8%, $25 par value preferred stock for $35 cash per share. This is the first issuance of preferred shares from the 50,000 authorized shares.
(a) Use the financial statement effects template to indicate the effects of each transaction.
Use negative signs with answers, when appropriate.
Balance Sheet
Contributed
Capital
Earned
Capital
Income Statement
Net
Income
(b) Prepare the December 31, 2012, stockholders' equity section of the balance sheet assuming that the company reports net income of $72,500 for the year.
Use a negative sign with your answer for treasury stock.
Common stock, $ 5 par value, 350,000 shares authorized; 150,000 shares issued and outstanding $ 750,000 Paid-in capital in excess of par value 600,000 Retained earnings 346,000Explanation / Answer
a) Balance Sheet Transaction Cash Asset + Noncash Asset = Liabilities + Contributed Capital + Earned Capital Jan. 5 1,20,000 + = + 1,20,000 + (10000*12) + = + (10000*12) + Jan. 18 -56,000 + = + -56,000 + (-4000*14) + = + (-4000*14) + Mar. 12 17,000 + = + 17,000 + (1000*17) (1000*17) July. 17 6,500 + = + 6,500 + (500*13) (500*13) Oct. 1 1,75,000 + = + 1,75,000 + (5000*35) (5000*35) Income Statement Revenue - Expenses = Net Income b) Stockholders' Equity Paid-in capital 8% Preferred stock, $25 par value, 50,000 shares authorized, 5,000 shares issued and outstanding 125000 (5000*25) Common stock, $5 par value, 350,000 shares authorized; 160,000 shares issued 800000 (160000*5) 925000 Additional paid-in capital Paid-in capital in excess of par value-preferred stock 50000 (5000*10) Paid-in capital in excess of par value-common stock 670000 (600000+10000*7) Paid-in capital from treasury stock 2500 (1000*3)-(500*1) 722500 Total paid-in capital 1647500 Retained earnings 346000 Less: Treasury stock (2,500 shares) at cost (use a negative sign with your answer) -35000 (2500*14) Total Stockholders' Equity 311000