Exercise 8-4 Effect of issuing common stock on the balance sheet LO 8-4 Newly fo

Question

Exercise 8-4 Effect of issuing common stock on the balance sheet LO 8-4

Newly formed Electronics Services Corporation has 83,000 shares of $6 par common stock authorized. On March 1, 2014, Electronics Services issued 8,000 shares of the stock for $11 per share. On May 2 the company issued an additional 20,500 shares for $19 per share. Electronics Services was not affected by other events during 2014.

Required

a.

Record the transactions in a horizontal statements model like the following one. In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA). Use NA to indicate that an element was not affected by the event. (Enter any decreases to account balances and cash outflows with a minus sign.)

b.

Determine the amount Electronics Services would report for common stock on the December 31, 2014, balance sheet.

c.

Determine the amount Electronics Services would report for paid-in capital in excess of par.

d. What is the total amount of capital contributed by the owners?

e.

What amount of total assets would Electronics Services report on the December 31, 2014, balance sheet?

Explanation / Answer

Electronic Services Corporation Journal entries for share issued a Date Accoint Title Dr $ Cr $ Mar 1.2014. Cash               88,000.00 Common Stock        48,000.00 Paid-in- Capital in Excess of Par -Common Stock      40,000.00 (Issue of 8000 common stock $6 par at $11 per share) Mar 2.2014. Cash            389,500.00 Common Stock   123,000.00 Paid-in- Capital in Excess of Par -Common Stock 266,500.00 (Issue of 20500 common stock $6 par at $19 per share) The cash flows are from Financing Activities (FA) b Electronic Services Corporation Balance sheet as on Dec 31.2014. Share holders Equity Amt $ Common Stock            171,000.00 c Electronic Services Corporation Balance sheet as on Dec 31.2014. Share holders Equity Amt $ Paid-in- Capital in Excess of Par -Common Stock            306,500.00 d Total Capital contributed by owners            477,500.00 e Electronic Services Corporation Balance sheet as on Dec 31.2014. Assets   Amt $ Cash            477,500.00 So total Assets is Balance sheet   on Dec31. 2014.            477,500.00

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