inim QUESTION ONE - SHARES & BUYBACKS- LO1 (25 possible marks) Instructions: Ans
ID: 2598462 • Letter: I
Question
inim QUESTION ONE - SHARES & BUYBACKS- LO1 (25 possible marks) Instructions: Answer each of the following questions by writing your answers in the spaces provided. (Show all your calculations) Galvano Inc. has two classes of capital stock outstanding: Preferred stock of par value-$20 which pays a fixed dividend of $2 per share. Common Stock of par value $5 par.common. . The company is authorized to issue 500,000 preferred shares and 3,000,000 common shares The Shareholders' equity section at the end of Dec 31, 2013 was as follows: Common Stock, $5 par (issued& outstanding 2.000,000) Preferred Stock, 8%, $20 par fissued&outstanding; 100,000 Paid-in capital in excess of par, common Paid-in capital in excess of par, Preferred Total Contributed Capital Retained Earnings Shareholders' Equity 10,000,000 2,000,000 10,000,000 100,000 22,100,000 3,500,000 25,600,000 The following events happened during the year 2014 Jan 2 Feb 25,000 shares of preferred stock issued for a total of $500,000 3 40.000 shares of common stock issued at $15 per share for advertising services provided by Delta Marketing Firm. Issued 5,000 common shares for & warehouse building valued at $40,000 30,000 shares of common treasury stock purchased at $8 per share May 15 Aug 5 Nov 7 Nov 15 10,000 shares of treasury stock reissued at $9 per share Re-Issued 15,000 shares of treasury stock at $6 per share re the appropriate journal entries to record the followings transaction (19 marks) Prepa Fill in the missing amount on the Shareholders' equity section on Dec 31, 2014 assuming the company made a net income of $3,000,000 during the year and paid total dividends of $2,290,000. (6 marks) b.Explanation / Answer
a. In the books of Galvano Inc. :
b. Galvano Inc.
Balance Sheet ( Partial )
December 31, 2014
Date Account Titles Debit Credit 2014 $ $ Jan 2 Cash 500,000 Preferred Stock 500,000 Feb 3 Advertising Expense ( 40,000 x $ 15) 600,000 Common Stock ( 40,000 x $ 5) 200,000 Paid-in Capital in Excess of Par: Common Stock 400,000 May 15 Building 40,000 Common Stock ( 5,000 x $5) 25,000 Paid-in Capital in Excess of Par Value : Common Stock 15,000 Aug 5 Treasury Stock ( 30,000 x $ 8) 240,000 Cash 240,000 Nov 7 Cash ( 10,000 x $9) 90,000 Trasury Stock ( 10,000 x $8) 80,000 Paid-in Capital : Treasury Stock 10,000 Nov 15 Cash ( 15,000 x $ 6) 90,000 Paid-in Capital: Treasury Stock 10,000 Retained Earnings 20,000 Treasury Stock ( 15,000 x $ 8) 120,000Related Questions
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