Whyville Corporation obtained its charter from the state in January that authori

Question

Whyville Corporation obtained its charter from the state in January that authorized 500,000 shares of common stock, $1 par value. During the first year, the company earned $68,000 and the following selected transactions occurred in the order given:

1.Indicate the account, amount, and direction of the effect for the above transactions.

2.

Prepare journal entries to record each transaction.

3.Prepare the stockholders’ equity section of the balance sheet at December 31.

a.Issued 300,000 shares of the common stock at $33 cash per share. b.Reacquired 6,000 shares at $34 cash per share to use as stock incentives for senior management.

Explanation / Answer

Ans 1 Common stock Additional Paid in capital Cash                  3,00,000.00                 96,00,000.00        99,00,000.00           -102,00,000.00    -102,00,000.00 Ans 2 Date Account head Debit Credit Cash                 99,00,000.00 Common Stock          3,00,000.00 Additional Paid in capital        96,00,000.00 Common Stock               102,00,000.00 Cash     102,00,000.00

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