The following transactions occurred at Whoton Inc. during its first year of oper

Question

The following transactions occurred at Whoton Inc. during its first year of operation: Issued 100,000 common shares at $5 each; 1,000,000 no par shares are authorized. Issued 10,000 common shares for a building and land. The building was appraised for $20,000, but the value of the land is undeterminable. The shares are selling for $10 on the open market. Purchased 1,000 of its own common shares on the open market for $16 per share. Declared a dividend of $0.10 per share on outstanding common stock. The dividend is to be paid after the end of the first year of operations. Market value of the shares is $26. Declared a 2-for-l stock split. The market value of the stock was $37 before the stock split. Reported $180,000 of income for the year. Indicate each transaction's effect on the assets, liabilities, and owners' equity of Whoton Inc. Prepare the Shareholders' Equity section of the Statement of Financial Position.

Explanation / Answer

1 Assets Liabilites Owners’ Equity Computation 5,00,000 5,00,000 5*100000 2 Assets Liabilites Owners’ Equity 20000 10000 10*10000 80000 90000 3 Assets Liabilites Owners’ Equity 16000 -16000 16*1000 Assets Liabilites Owners’ Equity 4 10,900 -10900 (100,000+10,000-1,000)*.10 Assets Liabilites Owners’ Equity 5 No entry required because stock splits do not require an accounting transaction to be recorded Assets Liabilites Owners’ Equity 6 1,80,000 1,80,000

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