Question

Identifying and Analyzing Financial Statement Effects of Stock Issuance and Repurchase

On January 1, 2016, Bartov Company issues 4,000 shares of $100 par value preferred stock at $200 cash per share. On March 1, the company repurchases 4,000 shares of previously issued $1 par value common stock at $79 cash per share.

a. Using the financial statement effects template, illustrate the effects of these two transactions.

Use negative signs with answers when appropriate. When applicable, enter total amount for contributed capital.

Balance Sheet Transaction Cash Asset + Noncash Assets = Liabilities + Contrib. Capital + Earned Capital - Contra Equity 1/1/16 Issued preferred stock. Answer + $Answer = Answer + Answer + Answer - Answer 3/1/16 Repurchase common stock. Answer + Answer = Answer + Answer + Answer - Answer

Income Statement Revenue - Expenses = Net Income Answer - Answer = Answer Answer - Answer = Answer

b. Prepare the journal entries for the two transactions.

General Journal
Date	Description		Debit	Credit
1/1/16	Answer

	Answer	Answer
	Preferred stock		Answer	Answer
	Answer

	Answer	Answer
3/1/16	Answer

	Answer	Answer
	Answer

Answer

Answer

c. Post the journal entries from b to the related T-accounts.

Cash
	Answer	Answer

Preferred Stock
	Answer	Answer

Treasury Stock
	Answer	Answer

Additional Paid in Capital
	Answer	Answer

Answer 1

The answers are given below.Thanks

Balance Sheet

Income Statement

Noncash

Contrib.

Earned

Transaction

Cash Asset

+

Assets

=

Liabilities

+

Captial

+

Capital

Revenues

-

Expenses

=

Net income

Issue shares of preferred stock-4000 shares @ 200 per share

800000

800000

Repurchase shares of common stock-4000 shares @ 79 per share

-316000

-316000

Journal Entries

SN

Account Title

Debit $

Credit $

a

Cash-4000 shares * 200 per share

800000

Preferred Stock-4000 shares * 100 per share

400000

Addl PIC in excess of par -PS

400000

b

Cash-4000*79

316000

Treasury Stock

316000

c

Posting into T Accounts

Cash

Date

Account Title

Amount -Dr $

Date

Account Title

Amount -Cr $

Preferred Stock

400000

Addl PIC in excess of Par

400000

Preferred Stock

Date

Account Title

Amount -Dr $

Date

Account Title

Amount -Cr $

Cash

400000

Treasury Stock

Date

Account Title

Amount -Dr $

Date

Account Title

Amount -Cr $

Cash

3160000

Additional Paid In Capital

Date

Account Title

Amount -Dr $

Date

Account Title

Amount -Cr $

Cash

400000