Question

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 sell shares of stock in the company to raise the additional funds for the camp.

Great Adventures has authorized $1 par value common stock. When the company began on July 1, 2021, Tony and Suzie each purchased 10,000 shares (20,000 shares total) of $1 par value common stock at $1 per share. The following transactions affect stockholders’ equity during the remainder of 2022:

November	5		Issue an additional 138,000 shares of common stock for $10 per share.
November	16		Purchase 13,800 shares of its own common stock (i.e., treasury stock) for $34 per share.
November	24		Resell 7,800 shares of treasury stock at $35 per share.
December	1		Declare a cash dividend on its common stock of $15,960 ($0.10 per share) to all stockholders of record on December 15.
December	20		Pay the cash dividend declared on December 1.
December	31		Pay $895,000 for construction of new cabins and other facilities. The entire expenditure is recorded in the Buildings account.

Required:

1. Record each of these transactions.

2. Great Adventures has net income of $42,307 in 2022. Retained earnings at the beginning of 2022 was $35,350. Prepare the stockholders’ equity section of the balance sheet for Great Adventures as of December 31, 2022.

Answer 1

Date	Account Titles and Explanation	Debit	Credit
Nov-05	Cash	$ 13,80,000
	Common stock (138000 X $1)		$   1,38,000
	Additional Paid - in - Capital - Common Stock (138000 X $9)		$ 12,42,000
Nov-16	Treasury Stock (13800 X $34)	$   4,69,200
	Cash		$   4,69,200
Nov-24	Cash (7800 X $35)	$   2,73,000
	Treasury Stock (7800 X $34)		$   2,65,200
	Additional Paid - in - Capital - Treasury Stock (7800 X $1)		$         7,800
Dec-01	Dividend	$       15,960
	Dividend payable		$       15,960
Dec-20	Dividend payable	$       15,960
	Cash		$       15,960
Dec-31	Building	$   8,95,000
	Cash		$   8,95,000
	Tony and Suize
	Balance sheet
	(Stockholder's Equity Section)
	At December 31, 2022
	Stockholder's Equity:
	Common stock	$   1,58,000
	Additional Paid - in - Capital	$ 12,49,800
	Total Paid - in Capital	$ 14,07,800
	Retained earnings	$       61,697
	Treasury Stock	$ -2,04,000
	Total Stockholder's Equity	$ 12,65,497
	Workings:
	Paid in capital in excess of par value, Common stock (138000 X $9)	$ 12,42,000
	Paid in capital in from sale of treasury stock [7800 X ($35-$34)]	$         7,800
	Additional Paid - in - Capital	$ 12,49,800
	Dividend declared	$       15,960
	Treasury Stock [(13800-7800)*34]	$   2,04,000
		Beginning balance	Addition	Deduction	Ending balance
	Common stock	$       20,000	$   1,38,000		$           1,58,000
	Additional Paid - in - Capital	$                -	$ 12,49,800		$        12,49,800
	Retained earnings	$       35,350	$       42,307	$ 15,960	$              61,697