Equity Transactions and Statement Preparation
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Equity Transactions and Statement Preparation
On January 5, 2007, Drabek Corporation received a charter granting the right to issue 5,000 shares of $100 par value, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of $5 par value common stock. It then completed these transactions.
Jan. 11 Issued 20,000 shares of common stock at $16 per share.
Feb. 1 Issued to Robb Nen Corp. 4,000 shares of preferred stock for the following assets: machinery with a
fair market value of $50,000; a factory building with a fair market value of $110,000; and land with an
appraised value of $270,000.
July 29 Purchased 1,800 shares of common stock at $19 per share. (Use cost method.)
Aug. 10 Sold the 1,800 treasury shares at $14 per share.
Dec. 31 Declared a $0.25 per share cash dividend on the common stock and declared the preferred dividend.
Dec. 31 Closed the Income Summary account. There was a $175,700 net income.
Instructions
(a) Record the journal entries for the transactions listed above.
(b) Prepare the stockholders' equity section of Drabek Corporation's balance sheet as of December
31, 2007.
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Solution Summary
On January 5, 2007, Drabek Corporation received a charter granting the right to issue 5,000 shares of $100 par value, 8% cumulative and nonparticipating preferred stock, and 50,000 shares of $5 par value common stock. It then completed these transactions.
Jan. 11 Issued 20,000 shares of common stock at $16 per share.
Feb. 1 Issued to Robb Nen Corp. 4,000 shares of preferred stock for the following assets: machinery with a
fair market value of $50,000; a factory building with a fair market value of $110,000; and land with an
appraised value of $270,000.
July 29 Purchased 1,800 shares of common stock at $19 per share. (Use cost method.)
Aug. 10 Sold the 1,800 treasury shares at $14 per share.
Dec. 31 Declared a $0.25 per share cash dividend on the common stock and declared the preferred dividend.
Dec. 31 Closed the Income Summary account. There was a $175,700 net income.
Instructions
(a) Record the journal entries for the transactions listed above.
(b) Prepare the stockholders' equity section of Drabek Corporation's balance sheet as of December
31, 2007.
Solution Preview
(a)
Jan. 11 Cash 320,000 (20,000*$16)
Common Stock 100,000 (20,000*$5)
Paid-In Capital In Excess of Par-Common Stock 220,000 (20,000*($16-$5))
Feb. 1 Machinery 50,000
Factory Building 110,000
Land 270,000
Preferred Stock 400,000 (4,000*$100)
...
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