Question

P8-52 Identifying and Analyzing Financial Statement Effects of Stock Transactions

The stockholders’ equity of Verrecchia Company at December 31, 2016, follows.

Common Stock, $5 par Value, 500,000 shares authorized.
350,000 shares issued and outstanding					$1,750,000
Paid-in capital in excess of par value					800,000
Retained earnings					634,000

During 2017, the following transactions occurred.

Jan. 5 Issued 10,000 shares of common stock for $13 cash per share.

Jan. 18 Repurchased 4,000 shares of common at $16 cash per share.

Mar.12 Sold one-fourth of the treasury shares acquired January 18 for $19 cash per share.

July. 17 Sold 500 shares of treasury stock for $14 cash per share

Oct. 1 Issued 5,000 shares of 8%, $25 par value preferred stock for $36 cash per share. This is the first issuance of preferred shares from the 50,000 authorized preferred shares.

Required

1. Use the financial statement effects template to indicate the effects of each transaction.

2. Prepare the December 31, 2017, stockholders’ equity section of the balance sheet assuming that the company reports net income of $76,900 for the year.

Answer 1

a.

	Cash	Common Stock	Preferred Stock	Paid in capital in excess of par value - Common Stock	Paid in capital in excess of par value - Preferred Stock	Paid in capital from Treasury Stock	Retained Earnings	Treasury Stock
Bal		$    17,50,000		$             8,00,000			$    6,34,000
Jan-05	$    1,30,000	$          50,000		$                 80,000
Jan-18	$      -64,000							$         64,000
Mar-12	$        19,000					$            3,000		$       -16,000
Jul-17	$          7,000					$           -1,000		$         -8,000
Oct-01	$    1,80,000		$         1,25,000		$                55,000
Bal	$    2,72,000	$    18,00,000	$         1,25,000	$             8,80,000	$                55,000	$            2,000	$    6,34,000	$        40,000

Stockholders Equity
Common Stock	$    18,00,000
Preferred Stock	$      1,25,000
Paid in capital in excess of par value - Common Stock	$      8,80,000
Paid in capital in excess of par value - Preferred Stock	$          55,000
Paid in capital from Treasury Stock	$            2,000
Total Paid in Capital	$    28,62,000
Retained Earnings	$      6,34,000
Sub total	$    34,96,000
Less Treasury Stock	$          40,000
Total Stockholders Equity	$    34,56,000