Question

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Whyville Corporation obtained its charter from the state in January that authorized 500,000 shares of common stock, $1 par value. During the first year, the company earned $51,000 and the following selected transactions occurred in the order given:

a.	Issued 130,000 shares of the common stock at $16 cash per share.
b.	Reacquired 4,300 shares at $17 cash per share to use as stock incentives for senior management.

1.

value:
10.00 points

Required information

Required:

1.

Indicate the account, amount, and direction of the effect for the above transactions. (Enter any decreases to account balances with a minus sign.) 2. value: 10.00 points Required information 2. Prepare journal entries to record each transaction. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.) 3. value: 10.00 points Required information 3. Prepare the stockholders’ equity section of the balance sheet at December 31. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

(1).

	Assets	=	Liabilities	+	Stockholders’ equity
(a).	Cash   + $2080000		NE		Common stock + $130000
					Additional paid in capital – common + $1950000
(b).	Cash – ($73100)		NE		Treasury stock – ($73100)

(2).

Items	Accounts Title & Explanation	Debit	Credit
(a).	Cash	$2080000
	Common stock (130000 * $1)		$130000
	Additional paid in capital – Common stock (130000 * $15)		$1950000
	(For recording issue of common stock)
(b).	Treasury Stock	$73100
	Cash		$73100
	(For recording reacquired of 4300 shares @ $17)

(3).

Whyville Corporation
Balance Sheet (Stockholders’ equity section)
Contributed capital;
Common stock, $1 par value (130000 * $1)	$130000
Additional paid in capital – Common stock (130000 * $15)	$1950000
Total contributed capital	$2080000
Retained earnings	$51000
Less: Treasury stock	($73100)
Stockholders’ equity	$2057900