P15-1 (Equity Transactions and Statement Preparation) On January 5, 2014, Phelps
ID: 2506875 • Letter: P
Question
P15-1 (Equity Transactions and Statement Preparation) On January 5, 2014, Phelps Corporation received a charter granting the right to issue 5,000 shares of $100.00 par value, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of $10.00 par value common stock. It then completed these transactions. Jan 11 Issued 20,000 shares of common stock at $16 per share. Feb 1 Issued to Sanchez Corp. 4,000 shares of preferred stock for the following assets: Equipment with a fair market value of $50,000 A factory building with a fair market value of $160,000 and land with an appraised value of $270,000 Jul 29 Purchased 1,800 shares of common stock at $17 per share. (Use the cost method.) Aug 10 Sold the 1,800 treasury shares at $14 per share. Dec 31 Declared a $0.25 per share cash dividend on the common stock and declared the preferred dividend. Dec 31 Closed the Income Summary account. There was a $175,700 net income. Instructions: (a) Record the journal entries for the transactions listed above.(b) Prepare the stockholders' equity section of Phelps Corporation's balance sheet as of
December 31, 2014. P15-1 (Equity Transactions and Statement Preparation) On January 5, 2014, Phelps Corporation received a charter granting the right to issue 5,000 shares of $100.00 par value, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of $10.00 par value common stock. It then completed these transactions. Jan 11 Issued 20,000 shares of common stock at $16 per share. Feb 1 Issued to Sanchez Corp. 4,000 shares of preferred stock for the following assets: Equipment with a fair market value of $50,000 A factory building with a fair market value of $160,000 and land with an appraised value of $270,000 Jul 29 Purchased 1,800 shares of common stock at $17 per share. (Use the cost method.) Aug 10 Sold the 1,800 treasury shares at $14 per share. Dec 31 Declared a $0.25 per share cash dividend on the common stock and declared the preferred dividend. Dec 31 Closed the Income Summary account. There was a $175,700 net income. Instructions: (a) Record the journal entries for the transactions listed above.
(b) Prepare the stockholders' equity section of Phelps Corporation's balance sheet as of
December 31, 2014.
Explanation / Answer
(a)
January 11
Cash (20,000 X $16)........................................................................... 320,000
Common Stock (20,000 X $10) .............................................. 200,000
Paid-in Capital in Excess of Par
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