Question

P8-23 (modified)

Sun Corporation received a charter that authorized the issuance of 100,000 shares of $10 par common stock and 50,000 shares of $50 par, 5 percent cumulative preferred stock. Sun Corporation completed the following transactions during its first year of operations. Record these transactions in the horizontal statements model provided below.

Jan 5      Sold 6,000 shares of the $10 par common stock for $15 per share.

Jan 12     Sold 1,000 shares of the 5 percent preferred stock for $55 per share.

Apr 5       Sold 30,000 shares of the $10 par common stock for $21 per share.

Dec 1     Declared the cash dividend on the outstanding shares of preferred stock for the year as well as a $0.50 per share dividend on the common stock. The dividends will be paid on December 20 to stockholders of record on December 10.       

Date	Assets	Liab.	Equity					Rev	Exp	Net Inc.	Cash Flow
	Cash	Div. Pay.	Com. Stk.	PIC in Excess	Pref. Stk.	PIC in Excess	R. Earn
1/5
1/12
4/5
12/1
12/20

Answer 1

• Requirement asked

Date	Assets	Liab.	Equity					Rev	Exp	Net Inc.	Cash Flow
	Cash	Div. Pay.	Com. Stk.	PIC in Excess	Pref. Stk.	PIC in Excess	R. Earn
05-Jan	$90,000		$60,000	$30,000							$90,000	FA
12-Jan	$55,000				$50,000	$5,000					$55,000	FA
05-Apr	$630,000		$300,000	$330,000							$630,000	FA
01-Dec		$20,500					($20,500)				$0	NA
20-Dec	($20,500)	($20,500)
	$754,500	$0	$360,000	$360,000	$50,000	$5,000	($20,500)	$0	$0	$0	$775,000	NC

• Calculation

Date

Assets

Liab.

Equity

Rev

Exp

Net Inc.

Cash Flow

Cash

Div. Pay.

Com. Stk.

PIC in Excess

Pref. Stk.

PIC in Excess

R. Earn

05-Jan

=6000 shares x $ 15

=6000 shares x $ 10 par

=6000 shares x $ 5

=6000*15

FA

12-Jan

=1000 shares x $ 55

=1000 shares x $ 50

=1000 shares x $ 5

=1000*55

FA

05-Apr

=30000 shares x $ 21

=30000 shares x $ 10 par

=30000 shares x $ 11

=30000*21

FA

01-Dec

=(1000 shares x $ 50 par x 5%)+(36000 common stock shares x $0.5)

-20500

0

NA

20-Dec

-20500

-20500