[The following information applies to the questions displayed below. Prairie Cor

Question

[The following information applies to the questions displayed below. Prairie Corp. completed the following transactions in 2014, the first year of operation: 1. Issued 19,000 shares of $5 par common stock at par. 2. Issued 1,800 shares of $34 stated value preferred stock at $36 per share 3. Purchased 400 shares of common stock as treasury stock for $7.5 per share 4. Declared a 5 percent cash dividend on preferred stock. 5. Sold 200 shares of treasury stock for $10.5 per share 6. Paid the cash dividend on preferred stock that was declared in Event 4 7. Earned revenue of $71,400 and incurred operating expenses of $38,050. 8. Appropriated $6,500 of retained earnings.

Explanation / Answer

Solution:

PRAIRIE Corp Accounting Equation for the year 2014 Event Assets = Liabilities Stockholder's Equity Cash = Dividends Payable + Preferred Stock Common Stock + Paid in capital in excess Preferred stock + Paid in capital in excess treasury stock - Treasury Stock + Retained Earnings + Appropriated Retained Earnings Accounting Title retained Earnings 1 $95,000.00 $95,000.00 2 $64,800.00 $61,200.00 $3,600.00 3 -$3,000.00 $3,000.00 4 $3,060.00 -$3,060.00 Dividends 5 $2,100.00 $600.00 -$1,500.00 6 -$3,060.00 -$3,060.00 7a $71,400.00 $71,400.00 Revenue 7b -$38,050.00 -$38,050.00 Expenses 8 -$6,500.00 $6,500.00 Totals $189,190.00 $0.00 $61,200.00 $95,000.00 $3,600.00 $600.00 $1,500.00 $23,790.00 $6,500.00

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