Question

Westby Corp., a high school uniform manufacturer, was authorized to issue an unlimited number of common shares. During January 2020, its first month of operations, the following selected transactions occurred:

Jan.    1        1,000 shares were issued to the organizers of the corporation. The total value of the shares was determined to be $11,700.
   5        15,000 shares were sold to various shareholders for $13.20 each.
   15        The board of directors declared a cash dividend of $0.72 per common share to shareholders of record on January 19, payable January 31.
   20        4,000 shares were issued in exchange for land valued at $46,800. The shares were actively trading on this date at $11.20 per share.
   31        Closed the Income Summary account, which showed a credit balance of $162,000.
   31        Paid the dividends declared on January 15.

Required:
a. Journalize the above transactions. The Company does not use a Cash Dividends Account.

Prepare the equity section of Westby’s balance sheet at January 31, 2020.

What was the average issue price per common share?

Answer 1

ANSWER:

1)

Date	Account title and explanation	Debit	Credit
Jan. 1	Organization expense	$ 11,700
	Common stock		$ 11,700
Jan. 5	Cash	$ 198,000
	Common stock (15,000x$12.60)		$ 198,000
Jan. 15	Retained earnings	$ 11,520
	Dividend payable (16,000 shares x $0.72)		$ 11,520
Jan. 20	Land	$ 46,800
	Common stock		$ 46,800
Jan. 31	Income summary	$ 162,000
	Retained earnings		$ 162,000
Jan. 31	Dividend payable	$ 11,520
	Cash		$ 11,520

2 ) Westby Corporation

Equity Section of Balance Sheet

At January 31, 2020

  

Common Stock 20,000 shares issued [11,700+198,000+46,800]	$256,500
Retained earnings [162,000-11520]	$150,480
Total Equity	$406,980

3)

Average issue price[256,500/20000shares]

$12.825

per share