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Horton Inc. Stock Transactions and Related Stock Calculations

The following transactions occurred at Horton Inc., during its first year of operation:
Issued 100,000 shares of common stock at $5 each; 1,000,000, shares are authorized at $1 par value. Issued 10,000 shares of common stock for building and land. The building was appraised for $20,000, but land value was undetermined. The stock is selling for $10 on the open market. Purchased 1,000 shares of its own common stock on the open market for $16 per share. Declared a dividend of $0.10 per share on outstanding common stock. The dividend is to be paid after the the end of the first year of operations. Market value of the stock is $26. Declared a 2-for-1 stock split. The market value of the stock was $37 before the stock split. Reported $180,000 of income for the year.

Required
Indicate each transaction's effect on the asset's, liabilities,, and stockholder's equity of Horton Inc.
Prepare the Stockholder's Equity section of the balance sheet.
Explain the number of shares of stock issued and outstanding at the end of the year.

Solution Preview

For #1, I lettered your questions a thru f, for simplicity purposes in the answer.
1. Assets = Liabilities + Stockholders' Equity
a. +500,000 +100,000
+400,000

b. +20,000 +10,000
+80,000 +90,000

c. -16,000 -16,000

d. +10,900 -10,900*

e. No accounting entry

f. +180,000 +180,000

The net income in the last transaction results in an increase of $180,000 in owners' ...

Solution Summary

This solution provides the correct answers, with calculations included, to the Horton Inc. stock transactions exercise listed.

$2.19