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# Scizzory Corporation

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EXERCISES 13-3
Prepare journal entries to record the following four separate issuances of stock:
1. Two thousand shares of no-par common stock are issued to the corporation's promoters in exchange
for their efforts, estimated to be worth \$30,000. The stock has no stated value.
2. Two thousand shares of no-par common stock are issued to the corporation's promoters in exchange
for their efforts, estimated to be worth \$30,000. The stock has a \$1 per share stated value.
3. Four thousand shares of \$10 par value common stock are issued for \$70,000 cash.
4. One thousand shares of \$100 par value preferred stock are issued for \$120,000 cash.

EXERCISES 13-7

On June 30, 2005, Scizzory Corporation's common stock is priced at \$31 per share before any stock dividend or split, and the stockholders' equity section of its balance sheet appears as follows:

Common stock?\$10 par value, 60,000 shares
authorized, 25,000 shares issued and outstanding . . . . . . . . . . . . \$250,000
Contributed capital in excess of par value, common stock . . . . . . . 100,000
Total contributed capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 350,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 330,000
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . \$680,000

1. Assume that the company declares and immediately distributes a 100% stock dividend. This event is recorded by capitalizing retained earnings equal to the stock's par value. Answer these questions about stockholders' equity as it exists after issuing the new shares:
a. What is the retained earnings balance?
b. What is the amount of total stockholders' equity?
c. How many shares are outstanding?
2. Assume that the company implements a 2-for-1 stock split instead of the stock dividend in part 1.
Answer these questions about stockholders' equity as it exists after issuing the new shares:
a. What is the retained earnings balance?
b. What is the amount of total stockholders' equity?
c. How many shares are outstanding?
3. Explain the difference, if any, to a stockholder from receiving new shares distributed under a large
stock dividend versus a stock split.

Check (1b) \$680,000
(2a) \$330,000

#### Solution Preview

EXERCISES 13-3
Prepare journal entries to record the following four separate issuances of stock:
1. Two thousand shares of no-par common stock are issued to the corporation's promoters in exchange for their efforts, estimated to be worth \$30,000. The stock has no stated value.

1. Organization Expenses 30,000
Common Stock, No-Par Value 30,000
Issued stock to promoters.

2. Two thousand shares of no-par common stock are issued to the corporation's promoters in exchange for their efforts, estimated to be worth \$30,000. The stock has a \$1 per share stated value.

2. Organization Expenses 30,000
Common Stock, \$1 Stated Value 2,000
Contributed Capital in Excess of Stated
Value, Common Stock
28,000
Issued stock to promoters.

3. Four thousand shares of \$10 par value common stock are issued for \$70,000 cash.

3. Cash 70,000
Common Stock, \$10 Par Value 40,000
Contributed Capital in Excess of Par
Value, Common Stock
30,000
Issued common stock for cash.

4. One thousand shares of \$100 par value ...

#### Solution Summary

This solution is to prepare journal entries to record the four separate issuances of stock and prepare the retained earnings balance and total stockholders' equity for Scizzory Corporation.

\$2.49