Sweet Sixteen has two classes of stock authorized: $100 par preferred and $1 par
ID: 2456632 • Letter: S
Question
Sweet Sixteen has two classes of stock authorized: $100 par preferred and $1 par value common. As of the beginning of 2012, 1,000 shares of preferred stock have been issued and 20,000 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2012:
March 1 Issue 3,000 additional shares of common stock for $22 per share.
April 1 Issue 5,000 additional shares of preferred stock for $110 per share.
June 1 Declare a cash dividend on common stock of $1 per share and a cash dividend on preferred stock of $5 per share to all stockholders of record on June 15.
June 30 Pay the cash dividends declared on June 1.
August 1 Repurchase 2,000 shares of common treasury stock for $18 per share.
October 1 Reissue 1,000 shares of treasury stock purchased on August 1 for $20 per share.
Sweet Sixteen has the following beginning balances in its stockholders’ equity accounts on January 1, 2012: preferred stock, $100,000, common stock, $20,000; paid-in capital, $380,000; and retained earnings, $450,000. Net income for the year ended December 31, 2012, is $65,000.
Required:
1. Record each of these transactions.
2. Indicate whether each of these transactions would increase (+), decrease (), or have no effect (NE) on total assets, total liabilities, and total stockholders’ equity by completing the following chart.
Transaction
Total
Assets
Total Liabilities
Total
Stockholders’
Equity
Issue common stock
Issue preferred stock
Declare cash dividends
Pay cash dividends
Repurchase treasury stock
Reissue treasury stock
3. Prepare the stockholders’ equity section of the balance sheet as of December 31, 2012.
4. Prepare the statement of stockholders’ equity for the year ended December 31, 2012.
5. Explain how items 3 and 4 are similar and how they are different.
THOSE ARE THE ANSWERES FOR THE FIRST TWO QUESTIONS :
March 1
Debit
Credit
Cash
66,000
Common Stock
3,000
Additional Paid-in Capital
63,000
April 1
Cash
550,000
Preferred Stock
500,000
Additional Paid-in Capital
50,000
June 1
Dividends
53,000
Dividends Payable
53,000
June 30
Dividends Payable
53,000
Cash
53,000
August 1
Treasury Stock
36,000
Cash
36,000
October 1
Cash
20,000
Treasury Stock
18,000
Additional Paid-in Capital
2,000
Transaction
Total
Assets
Total Liabilities
Total
Stockholders’
Equity
Issue common stock
+
NE
+
Issue preferred stock
+
NE
+
Declare cash dividends
NE
+
-
Pay cash dividends
-
-
NE
Purchase treasury stock
-
NE
-
Reissue treasury stock
+
NE
+
I WANT THE ANSWERS OF THE LAST THREE QUESTIONS.
Transaction
Total
Assets
Total Liabilities
Total
Stockholders’
Equity
Issue common stock
Issue preferred stock
Declare cash dividends
Pay cash dividends
Repurchase treasury stock
Reissue treasury stock
Explanation / Answer
Solution ;
3.stockholders’ equity section
PAID IN CAPITAL
PREFERRED STOCK
600000
COMMON STOCK
23000
PAID IN EXCESS OF PAR
495000
RETAINED EARNING
462000
LESS : TREASURY STOCK
18000
TOTAL STOCKHOLDERS EQUITY
1562000
4.stockholders’ equity statement
PREFERRED STOCK
COMMON STOCK
PAID IN EXCESS OF PAR
TREAUSRY STOCK
RETAINED EARNING
TOTAL
OPENING BALANCE
100000
20000
380000
450000
950000
ISSUED SHARE FOR CASH
500000
3000
115000
618000
PURCHASE OF TREASURY STOCK
-18000
-18000
NET INCOME
65000
65000
CASH DIVIDEND
-53000
-53000
CLOSING BALANCE
600000
23000
495000
-18000
462000
1562000
5..Both have same final amount that is shown under balance sheet - stockholders equity. They are different in the sense stockholders equity sections shows final amount under each head like preferred stock, common stock etc whereas statement shows from opening balance till closing final balance.
3.stockholders’ equity section
PAID IN CAPITAL
PREFERRED STOCK
600000
COMMON STOCK
23000
PAID IN EXCESS OF PAR
495000
RETAINED EARNING
462000
LESS : TREASURY STOCK
18000
TOTAL STOCKHOLDERS EQUITY
1562000
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