Question
In: Accounting
Prepare the stockholders’ equity section as of April 30, 2020. Net income for the first 4 months of 2020 was $130,000.
VII Cortex Corporation had the following stockholders’ equity as of January 1, 2020:
Common stock, $5 par value, 20,000 shares issued $100,000
Paid-in Capital in Excess of Par – Common Stock 300,000
Retained earnings 320,000
Total Stockholders’ Equity $720,000
During 2020, the following transactions occurred:
Feb. 20 Cortex repurchased 2,400 shares of treasury stock at a price of $19 per share.
Mar. 11 800 shares of treasury stock repurchased above were reissued at $17 per share.
Mar. 21 500 shares of treasury stock repurchased above were reissued at $14 per share.
Apr. 11 600 shares of treasury stock repurchased above were reissued at $20 per share.
April 25 The remaining shares of treasury stock were retired.
Required:
- (a) Prepare the stockholders’ equity section as of April 30, 2020. Net income for the first 4 months of 2020 was $130,000. Please include both Cost and Par value methods.
Solutions
Expert Solution
| COST METHOD | ||
| Working Note: | for Calculation of Additional paid-in capital: | |
| Date | Particulars | Amount (in $) |
| Jan, 1 | Addditional Paid-in capital balance | 300,000 |
| Feb, 20 | 2400 Treasury stock repurchased at $19 per share | - |
| Mar, 11 | 800 Treasury stock reissued at $17 per share (800*2) | (1600) |
| Mar, 21 | 500 Treasury stock reissued at $14 per share (500*5) | (2500) |
| Apr, 11 | 600 Treasury stock reissued at $20 per share (600*1) | 600 |
| Apr, 25 | remaining treasuer stocks i.e. 500 were retired 500*(19-5) | (7000) |
| additional paid-in capital as on 30 april | 289,500 | |
| Stakeholders' Equity as on april 30, 2020 | ||
| Particulars | Amount (in $) | |
| Common stock (20000-500 treasury stock retired) @$5 par value | 97,500 | |
| additional paid-in capital (as per the above working) | 289,500 | |
| Retained Earnings ($320,000 + $130,000) | 450,000 | |
| 837,000 |
| PAR VALUE METHOD | ||
| Working Note: | for Calculation of additional paid-in capital: | |
| Date | Particulars | Amount (in $) |
| Jan, 1 | Addditional Paid-in capital balance | 300,000 |
| Feb, 20 | 2400 Treasury stock repurchased at $19 per share ( 2400*14) | (33,600) |
| Mar, 11 | 800 Treasury stock reissued at $17 per share (800*12) | 9600 |
| Mar, 21 | 500 Treasury stock reissued at $14 per share (500*9) | 4500 |
| Apr, 11 | 600 Treasury stock reissued at $20 per share (600*15) | 9000 |
| Apr, 25 | remaining treasuer stocks i.e. 500 were retired | - |
| additional paid-in capital as on 30 april | 289,500 |
Note: At the time of original issue of common stock ; par value was $ 5 and the additional paid-in value was $15. so at the time treasury stock, additional paid-in capital can be debited upto $15.
| Stakeholders' Equity as on april 30, 2020 | |
| Particulars | Amount (in $) |
| Common stock (20000-500treasury stock retired) @$5 par value | 97,500 |
| additional paid-in capital (as per the above working) | 289,500 |
| Retained Earnings ($320,000 + $130,000) | 450,000 |
| 837,000 |
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