Question

In: Accounting

Tony and Suzie purchased land costing $500,000 for a new camp in January 2020. Now they...

Tony and Suzie purchased land costing $500,000 for a new camp in January 2020. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow another million dollars, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They decided to go ahead and sell shares of stock in the company to raise the additional funds for the camp. Great Adventures has two classes of stock authorized: 9%, $10 par preferred, and $1 par value common.

When the company began on July 1, 2018, Tony and Suzie each purchased 12,500 shares of $1 par value common stock at $1 per share. The following transactions affect stockholders’ equity during 2020, its third year of operations:

July 2 Issue an additional 110,000 shares of common stock for $9 per share.

September 10 Repurchase 11,000 shares of its own common stock (i.e., treasury stock) for $12 per share.

November 15 Reissue 5,500 shares of treasury stock at $13 per share.

December 1 Declare a cash dividend on its common stock of $129,500 ($1 per share) to all stockholders of record on December 15.

December 31 Pay the cash dividend declared on December 1.

Required:

1. Record each of these transactions.

2. Great Adventures has net income of $147,000 in 2020. Retained earnings at the beginning of 2020 was $137,000. Prepare the stockholders’ equity section of the balance sheet for Great Adventures as of December 31, 2020.?

Solutions

Expert Solution

Account Description Debit Credit
2-Jul-20 Cash    990,000.00
Common Stock    110,000.00
Additional Pain in Capital    880,000.00
(Being 110000 shares issued at @ 9 per share)
10-Sep-20 Treasury stock    132,000.00
To Cash    132,000.00
(Being Own shares Purchased 11000 @ 12 per share)
15-Nov-20 Cash      71,500.00
Additional Pain in Capital        5,500.00
Treasury stock      66,000.00
(Being 5500 Treasury stock re-issued )
1-Dec-20 Dividend    129,500.00
Dividend Payable    129,500.00
(Being Dividend Declared @1 per share)
31-Dec-20 Dividend Payable    129,500.00
Cash    129,500.00
(Being Dividend paid)
Great Adventures Partial Balancesheet as at 31st December 2020
Common Stock, $1 par Value 135000 shares issued ,
and 129,500 shares Outstanding
           135,000.00
Additional Pain-in Capital            885,500.00
Retained earnings            284,000.00
Less: Treasury Stock, 5500 shares              66,000.00
Total Shareholders Equity        1,238,500.00

Please note that I have assumed that net income given in the question is after Divided. If it is not the case then please comment I will suggest the alternative.


Related Solutions

Tony and Suzie purchased land costing $500,000 for a new camp in January 2020. Now they...
Tony and Suzie purchased land costing $500,000 for a new camp in January 2020. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow another million dollars, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They decided to...
Tony and Suzie have purchased land for a new camp. Now they need money to build...
Tony and Suzie have purchased land for a new camp. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow an additional $1 million, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They decided to go ahead and...
Tony and Suzie have purchased land for a new camp. Now they need money to build...
Tony and Suzie have purchased land for a new camp. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow an additional $1 million, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They decided to go ahead and...
Tony and Suzie have purchased land for a new camp. Now they need money to build...
Tony and Suzie have purchased land for a new camp. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow an additional $1 million, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They decided to go ahead and...
Tony and Suzie have purchased land for a new camp. Now they need money to build...
Tony and Suzie have purchased land for a new camp. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow an additional $1 million, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They decided to go ahead and...
Tony and Suzie have purchased land for a new camp. Now they need money to build...
Tony and Suzie have purchased land for a new camp. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow an additional $1 million, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They decided to go ahead and...
Great Adventures Problem AP10-1 (GL) Tony and Suzie have purchased land for a new camp. Now...
Great Adventures Problem AP10-1 (GL) Tony and Suzie have purchased land for a new camp. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow an additional $1 million, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They...
Great Adventures Problem AP10-1 (GL) Tony and Suzie have purchased land for a new camp. Now...
Great Adventures Problem AP10-1 (GL) Tony and Suzie have purchased land for a new camp. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow an additional $1 million, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They...
[The following information applies to the questions displayed below.] Tony and Suzie have purchased land for...
[The following information applies to the questions displayed below.] Tony and Suzie have purchased land for a new camp. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow an additional $1 million, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics...
7.   New Heights Aviation purchased on January 1, 2020 a plane for $ 500,000. The plane...
7.   New Heights Aviation purchased on January 1, 2020 a plane for $ 500,000. The plane is expected to         have a 20 year life after which it can be sold for $ 100,000. Required: Compute depreciation expense for first three years using straight line. Compute depreciation expense for the first three years using double-diminishing balance method. At the end of three years the plane is sold for $400,000. Prepare journal entry to record the sale assuming depreciation was recorded...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT