Tony and Suzie purchased land costing $500,000 for a new camp in January 2020. N
ID: 2587178 • Letter: T
Question
Tony and Suzie purchased land costing $500,000 for a new camp in January 2020. 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: 9%, $10 par preferred, and $1 par value common. When the company began on July 1, 2018, Tony and Suzie each purchased 12,500 shares of $1 par value common stock at $1 per share. The following transactions affect stockholders' equity during 2020, its third year of operations: July 2 Issue an additional 110,000 shares of common stock for $15 per share. September 10 Repurchase 11,000 shares of its own common stock (i.e., treasury stock) for $18 per share. November 15 Reissue 5,500 shares of treasury stock at $19 per share December 1 Declare a cash dividend on its common stock of $129,500 ($1 per share) to all stockholders of record on December 15. December 31 Pay the cash dividend declared on December 1Explanation / Answer
GREAT ADVENTURE INC. Balance sheet Stockholder's Equity Section December 31, 2020 Common stock 129500 Additional paid in capital paid in capital in excess of stated value Common stock 1540000 Paid in capital from treasury stock 5500 Total Paid in capital 1545500 Retained earnings 180500 Treasury Stock -99000 Total shareholder's Equity 1756500 I have prepared Journal entry and statement of retained earnings for your understanding Date/S. N. Accounts Title & Explanation Debit Credit Amount in $ Amount in $ Jul-02 Cash 1650000 Common stock 110000 paid in capital in excess of stated value Common stock 1540000 To record the issuance of common stock Sep-10 Treasury Stock 198000 Cash 198000 To record the repurchase of common stock Mar-15 Cash 104500 Treasury Stock 99000 paid in capital in excess of stated value Common stock 5500 To record the issuance of common stock Dec-01 Retained earnings 129500 Dividend payable 129500 To record the declaration of Cash Dividend Dec-31 Dividend payable 129500 Cash 129500 To record the payment of cash dividend Dec-31 Income summery 160000 Retained earnings 160000 T record the transfer of net income to retained earnings Statement of Retained earnings Beginning Balance 150000 Add : Net income from Income summery 160000 Less : Cash Dividend 129500 Ending Balance 180500