Hammond Corporation was formed when it issued shares of common stock to two of i

Question

Hammond Corporation was formed when it issued shares of common stock to two of its shareholders Hammond issued 5,000 shares of $12 par common stock to P. Coldwell in exchange for $70,000 cash (the issue price was $14 per share). Hammond also issued 2,400 shares of stock to M. Roberts in exchange for a one-year-old delivery van on the same day. Roberts had originally paid $40,320 for the van. Required a. What was the market value of the delivery van on the date of the stock issue? Market value b. Show the effect of the two stock issues on Hammond's books in a horizontal statements model like the following one. In the Cash Flow column, indicate whether the item is an operating activity (OA), arn investing activity (IA), or a financing activity (FA). Use NA to indicate that an element was not affected by the event. Show effect on the accounting equation in the order provided in the question. (Enter any decreases to account balances and cash outflows with a minus sign.) HAMMOND CORPORATION Horizontal Statements Model Balance Sheet Income Statement Assets Stockholders' Equity Statement of Cash Flow Event Paid-in Common Capital In RevenueExpenseNet Income Cash Van Stock Excess

Explanation / Answer

a Market price = 2400*14= $33600 b Cash Van Common Stock Paid in capital in excess Revenue Expenses Net income Statement of cash flows 1 70000 60000 10000 70000    FA 2 33600 28800 4800 a NA

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