Question
In: Accounting
Stock Issuance Utep Enterprises had the following transactions during 2017, its first year of business. Required:...
Stock Issuance
Utep Enterprises had the following transactions during 2017, its first year of business.
Required:
1. Identify and analyze the effect of each transaction.
a. Issued 5,400 shares of $5 par common stock for cash at $15 per share.
| Activity | |
| Accounts | |
| Statement(s) |
How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry"
and leave the amount box blank. If the effect on a financial
statement item is negative, i.e, a decrease, be sure to enter the
answer with a minus sign.
| Balance Sheet | Income Statement | ||||||||||||||
| Stockholders' | Net | ||||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | – | Expenses | = | Income | ||||||
b. Issued 6,200 shares of common stock on May 1 to acquire a factory building from Barkley Company. Barkley had acquired the building in 2013 at a price of $150,000. Utep estimated that the building was worth $175,000 on May 1, 2017.
| Activity | |
| Accounts | |
| Statement(s) |
How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry"
and leave the amount box blank. If the effect on a financial
statement item is negative, i.e, a decrease, be sure to enter the
answer with a minus sign.
| Balance Sheet | Income Statement | ||||||||||||||
| Stockholders' | Net | ||||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | – | Expenses | = | Income | ||||||
c. Issued 1,100 shares of stock on June 1 to acquire a patent. The accountant has been unable to estimate the value of the patent but has determined that Utep's common stock was selling at $25 per share on June 1.
| Activity | |
| Accounts | |
| Statement(s) |
How does this entry affect the accounting equation?
If a financial statement item is not affected, select "No Entry"
and leave the amount box blank. If the effect on a financial
statement item is negative, i.e, a decrease, be sure to enter the
answer with a minus sign.
| Balance Sheet | Income Statement | ||||||||||||||
| Stockholders' | Net | ||||||||||||||
| Assets | = | Liabilities | + | Equity | Revenues | – | Expenses | = | Income | ||||||
2. Determine the balance sheet amounts for common stock and additional paid-in capital.
| Common stock | $ |
| Additional paid-in capital | $ |
| Total contributed capital | $ |
Solutions
Expert Solution
1a.
| Activity | Financing | ||||||
| Accounts | Cash Increases, Common Stock Increases, Additional Paid-in Capital-Common Increases | ||||||
| Statements | Balance Sheet | ||||||
| Balance Sheet | Income Statement | |||||||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | Revenue | - | Expense | = | Net Income | |||||
| Cash (5400 x $15) | 81000 | No Entry | Common Stock (5400 x $5) | 27000 | No Entry | No Entry | ||||||||
| No Entry | No Entry | Additional Paid-in Capital | 54000 | No Entry | No Entry | |||||||||
b.
| Activity | Investing and Financing | ||||||
| Accounts | Building Increases, Common Stock Increases, Additional Paid-in Capital-Common Increases | ||||||
| Statements | Balance Sheet | ||||||
| Balance Sheet | Income Statement | |||||||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | Revenue | - | Expense | = | Net Income | |||||
| Building | 175000 | No Entry | Common Stock (6200 x $5) | 31000 | No Entry | No Entry | ||||||||
| No Entry | No Entry | Additional Paid-in Capital | 144000 | No Entry | No Entry | |||||||||
c.
| Activity | Investing and Financing | ||||||
| Accounts | Patent Increases, Common Stock Increases, Additional Paid-in Capital-Common Increases | ||||||
| Statements | Balance Sheet | ||||||
| Balance Sheet | Income Statement | |||||||||||||
| Assets | = | Liabilities | + | Stockholders' Equity | Revenue | - | Expense | = | Net Income | |||||
| Patent (1100 x $25) | 27500 | No Entry | Common Stock (1100 x $5) | 5500 | No Entry | No Entry | ||||||||
| No Entry | No Entry | Additional Paid-in Capital | 22000 | No Entry | No Entry | |||||||||
2.
| Common stock | $ 63,500 |
| Additional Paid-in capital | $ 220,000 |
| Total contributed capital | $ 283,500 |
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