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Effect of Issuing Common Stock on the Balance Sheet

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#1
Effect of issuing common stock on the balance sheet
Newly formed Electronics Services Corporation has 100,000 shares of $10 par common stock authorized. On March 1, 2014, Electronics Services issued 20,000 shares of the stock for $12 per share. On May 2 the company issued an additional 30,000 shares for $15 per share. Electronics Services was not affected by other events during 2014.

Required
a) Record the transactions in a horizontal statements model like the following one. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an element was not affected by the event.
b) Determine the amount Electronics Services would report for common stock on the December 31,2014 balance sheet.
c) Determine the amount Electronic Services would report for paid-in capital in excess of par
d) What is the total amount of capital contributed by the owners?
e) What amount of total assets would Electronics Services report on the December 31, 2014 balance sheet?

#2
Recording and reporting common and preferred stock transactions
Goldman Inc. was organized on June 1, 2014. It was authorized to issue 500,000 shares of $10 par common stock and 100,000 shares of 4 percent cumulative class A preferred stock. The class A stock had a stated value of $50 per share. The following stock transactions pertain to Goldman Inc.:
1. Issued 40,000 shares of common stock for $16 per share.
2. Issued 20,000 shares of the class A preferred stock for $52 per share.
3. Issued 60,000 shares of common stock for $20 per share.

Required
Prepare the stockholders' equity section of the balance sheet immediately fter these transactions have been recognized.

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#1
a)
Compute the Cash received at par value and Paid-in Excess of par value for each date. Par value is $10. Only compute the amounts using the issued shares, not the authorized shares.

For the shares issued on March 1, 2014:
Com Stk = 20,000 X $10 = $200,000
Paid-in excess = 20,000 X ($12 - $10) = $40,000

For the shares issued on May 2, 2014:
Com Stk = 30,000 X ...

Solution Summary

This solution contains step-by-step computations for each problem is shown in 2 pdf files. All required answers are given. An Excel file showing computations for the table for question #1, and stockholders' equity section of the balance sheet for question #2 are given.

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See Also This Related BrainMass Solution

8.26 Transaction Analysis & 9.26 Complete Balance Sheet

8.26 - Enter the transaction letter in the first column and show the effect ( if any) of each of the following transactions on each financial statement category by entering a plus ( ) or minus ( ) sign and the amount in the appropriate column. Do not show items that affect net income in the retained earnings column. You may also write the entries to record these transactions. You should assume that the transactions occurred in the listed chronological sequence and that no stock had been previously issued. ( Hint: Remember to consider appropriate effects of previous transactions.)
a. Issued 1,500 shares of $ 100 par value preferred stock at par.
b. Issued 2,400 shares of $ 100 par value preferred stock in exchange for land that had an appraised value of $ 306,000.
c. Issued 69,000 shares of $ 5 par value common stock for $ 11 per share.
d. Purchased 13,500 shares of common stock for the treasury at $ 13 per share.
e. Sold 6,000 shares of the treasury stock purchased in transaction d for $ 14 per share.
f. Declared a cash dividend of $ 1.75 per share on the preferred stock outstanding, to be paid early next year.
g. Declared and issued a 5% stock dividend on the common stock when the market price per share of common stock was $ 15.

9.26 - Complete balance sheet and prepare a statement of changes in retained earnings Following is a statement of cash flows ( indirect method) for Hartford, Inc., for the year ended December 31, 2011. Also shown is a partially completed comparative balance sheet as of December 31, 2011 and 2010:

Cash Flows from Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . $ 9,000
Add ( deduct) items not affecting cash:
Depreciation expense . . . . . . . . . . . . . . . . . . 45,000
Decrease in accounts receivable. . . . . . . . . . . . . 23,000
Increase in inventory . . . . . . . . . . . . . . . . . ( 7,000)
Increase in notes payable . . . . . . . . . . . . . . . 12,000
Decrease in accounts payable. . . . . . . . . . . . . . ( 6,000)
Net cash provided by operating activities . . . . . . . $ 76,000

Cash Flows from Investing Activities:
Purchase of equipment. . . . . . . . . . . . . . . . . $( 50,000) Purchase of buildings . . . . . . . . . . . . . . . . . ( 48,000)
Net cash used by investing activities . . . . . . . . $( 98,000)

Cash Flows from Financing Activities:
Proceeds from short- term debt... . . . . . . . . . . . . 5,000
Cash used for retirement of long- term debt . . . . . . $( 25,000) Proceeds from issuance of common stock . . . . . . . . . . 10,000
Payment of cash dividends on common stock . . . . . . . ( 3,000)
Net cash used by financing activities . . . . . . . . . $( 13,000)
Net decrease in cash for the year . . . . . . . . . . . $( 35,000)

HARTFORD, INC. Comparative Balance Sheets At December 31, 2011 and 2010

Assets 2011 2010 Current assets:
Cash . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 88,000 Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . 73,000 Inventory... . . . . . . . . . . . . . . . . . . . . . .56,000
Total current assets . . . . . . . . . . . . . . . . . $ $ Land . . . . . . . . . . . . . . . . . . . . . . . . . $ $ 40,000 Buildings and equipment . . . . . . . . . . . . . . . . 260,000
Less: Accumulated depreciation . . . . . . . . . . . . . . .. (123,000) Total land, buildings, and equipment . . . . . . . . . $ $
Total assets . . . . . . . . . . . . . . . . . . . . . $ $

Liabilities
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . $ $ 29,000 Short- term debt . . . . . . . . . . . . . . . . . . . 32,000
Notes payable .......... . . . . . . . . . . . . . . . . . . . . . 36,000 Total current liabilities . . . . . . . . . . . . . . $ $
Long- term debt . . . . . . . . . . . . . . . . . . . $ 85,000 $

Owners' Equity
Common stock . . . . . . . . . . . . . ...............$ 40,000 $ Retained earnings . . . . . . . . . . . . . . . . . . .$ $
Total owners' equity . . . . . . . . . . . . . . . . . $ $
Total liabilities and owners' equity . . . . . . . . . $ $

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