Great Adventures (This is a continuation of the Great Adventures problem from ea
ID: 2576460 • Letter: G
Question
Great Adventures (This is a continuation of the Great Adventures problem from earlier chapters.) AP10-1 Tony and Suzie purchased land costing $500,000 for a new camp in January 2020. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow another million dollars, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They decided to go ahead and sell shares of stock in the company to raise the additional funds for the camp. Great Adventures has two classes of stock authorized: 8%, $10 par preferred, and $1 par value common Continuing Problem When the company began on July 1, 2018, Tony and Suzie each purchased 10,000 shares of $1 par value common stock at $1 per share. The following transactions affect stockholders' equity during 2020, its third year of operations July 2 Issue an additional 100,000 shares of common stock for $12 per share September 10 Repurchase 10,000 shares of its own common stock (i.e treasury stock) for $15 per share Reissue 5,000 shares of treasury stock at $16 per share Declare a cash dividend on its common stock of $115,000 ($1 per share) to all stockholders of record on December 15 November 15 December 1 December 31 Pay the cash dividend declared on December 1 Requirea: 1. Record each of these transactions 2. Great Adventures has net income of $150,000 in 2020. Retained earnings at the beginning of 2020 was $140,000. Prepare the stockholders' equity section of the balance sheet for Great Adventures as of December 31, 2020Explanation / Answer
Date Account Title and Explanation Debit Credit 1-Jul-18 Cash $20,000 Common Stock $20,000 (To record the issue of common stock) 2-Jul Cash (100,000 x $12) $1,200,000 Common stock (100,000 x $1) $100,000 Additional Paid-in Capital - Common Stock $1,100,000 (To record the issue of common stock) 10-Sep Treasury Stock (10,000 x $15) $150,000 Cash $150,000 (To record repurchase of treasury stock) 15-Nov Cash (5,000 x $16) $80,000 Treasury Stock (5,000 x $15) $75,000 Additional Paid-in Capital - Treasury Stock $5,000 (To record the reissue of treasury stock) 1-Dec Cash Dividend $115,000 Dividend Payable $115,000 (To record the dvidend payable) 31-Dec Dividend Payable $115,000 Cash $115,000 (To record the payment of cash) 31-Dec Retained Earnings $115,000 Cash Dividend $115,000 (To record the closing entry) 31-Dec Net Income $150,000 Retained Earnings $150,000 (To record closing entry) STOCKHOLDERS' EQUITY SECTION Particulars Amount Amount Paid-in Capital Common Stock $115,000 Additional Paid-in Capital - Common Stock $1,100,000 Additional Paid-in Capital - treasury Stock $5,000 $1,220,000 Retained Earnings ($140,000 + $150,000 - $115,000) $175,000 Less: Treasury Stock $75,000 Total Stockholders' Equity $1,320,000
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