Keshena Co is incorporated with 1,000,000 common shares authorized at the begini

Question

Keshena Co is incorporated with 1,000,000 common shares authorized at the begining of this year. The following journal entries impacted its shareholders' equity during its first year of operations.

In addition to the above, Keshena Co. generates $800,000 of revenue and incurred $400,000 of operating expenses during the first year. Cash dividends declared and paid amount to $25,000.

Required:

1. How many shares of common stock are outstanding at the year end?

2. What is the amount of minimum legal capital at year end?

3. What is the total Contributed or Paid in Capital at year end?

4. What is the total shareholder's equity at year end?

5. If the corporation purchased 1000 of its own shares for $35.00 per share. How will this impact the number of shares Authorized? The number of shares issued? The number of shares Outstanding? Total shareholder's equity?

a. Cash 243,000 common stock, $20 Par 188,000 paid in capital in excess of par 55,000 b. Organizational Costs 175,000 common stock, $20 Par 100,00 paid in capital in excess of par 75,000 c. Cash 45,000 Accounts Receivable 16,500 Building 82,800 Notes Payable 59,600 Common Stock, $20 Par 43,760 Paid in capitla in excess of par 40,940 d. Cash 107,400 common stock, $20 Par 62,400 paid in capital in excess of par 45,000

Explanation / Answer

Shares of common stock are outstanding at the year end S No. Particulars No of Shares 1 For Issue of Cash                9,400 2 For Issue of Org Cost                5,000 3 For Issue of Cash                2,188 3 For Issue of Cash                3,120              19,708 Amount of minimum legal capital at year end No of Shares * Par Value 19,708*20            394,160 Total Contributed or Paid in Capital at year end At par Value            394,160 Share Premium            215,940 Total shareholder's equity at year end At par Value            215,940 Share Premium            215,940 Net Income            375,000 (8 L -4L - 25K) Total            806,880 If it Buyback 1,000 Shares: No Impact on Authorized capital No of Shares issued/Otstandng will get reduced by 1,000 Shares Total Equity Value will get reduced by 25,000 $ as Par Value

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