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Question #2 During its first year of operations, Roldan Corporation had the following transactions pertaining to...

Question #2

During its first year of operations, Roldan Corporation had the following transactions pertaining to its common stock.

Jan. 10            Issued 60,000 shares for cash at $5 per share.

July 1                Issued 50,000 shares for cash at $8 per share.

Instructions:

(a) Journalize the transactions, assuming that the common stock has a par value of $5 per share.

(b) Journalize the transactions, assuming that the common stock is no-par with a stated value of $2 per share.

(c) Compare the effect the two Jan. 10 transactions would have on Roldan’s assets, liabilities, stockholders’ equity, and net income.

(d) Compare the effect the two July 1 transactions would have on Roldan’s assets, liabilities, stockholders’ equity, and net income.

Solutions

Expert Solution

(a)

Date Account Titles and Explanation Debit Credit
Jan. 10 Cash (60000 x $5) 300000
Common stock (60000 x $5) 300000
(To record issue of common stock)
Jul. 1 Cash (50000 x $8) 400000
Common stock (50000 x $5) 250000
Paid-in capital in excess of par value (50000 x $3) 150000
(To record issue of common stock)

(b)

Date Account Titles and Explanation Debit Credit
Jan. 10 Cash (60000 x $5) 300000
Common stock (60000 x $2) 120000
Paid-in capital in excess of stated value (60000 x $3) 180000
(To record issue of common stock)
Jul. 1 Cash (50000 x $8) 400000
Common stock (50000 x $2) 100000
Paid-in capital in excess of stated value (50000 x $6) 300000
(To record issue of common stock)

(c)

Balance Sheet Income Statement
Date Assets = Liab. + Equity Rev. - Exp. = Net Inc.
Cash Common stock PIC in excess of par value PIC in excess of stated value
Jan. 10 300000 = NA + 300000 NA NA NA - NA = NA
Jan. 10 300000 = NA + 120000 NA 180000 NA - NA = NA

(d)

Balance Sheet Income Statement
Date Assets = Liab. + Equity Rev. - Exp. = Net Inc.
Cash Common stock PIC in excess of par value PIC in excess of stated value
Jul. 1 400000 = NA + 250000 150000 NA NA - NA = NA
Jul. 1 400000 = NA + 100000 NA 300000 NA - NA = NA

Note: The effect of the transactions on the assets, liabilities, stockholders' equity and net income under (c) and (d) is shown by way of an accounting equation. NA denotes no effect.


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