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12 July, 07:16

Tarrant Corporation was organized this year to operate a financial consulting business. The charter authorized the following stock: common stock, $17 par value, 11,500 shares authorized. During the year, the following selected transactions were completed: a. Sold 5,800 shares of common stock for cash at $34 per share. b. Sold 2,200 shares of common stock for cash at $39 per share. c. At year-end, the accounts reflected income of $7,300. No dividends were declared.

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  1. 12 July, 08:54
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    Find the requirement below:

    1. Prepare the journal entries required to record the sale of common stock in (a) and (b). (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

    2. Prepare the stockholders' equity section as it should be reported on the year-end balance sheet. (Amounts to be deducted should be indicated by a minus sign.)

    First issue of shares:

    Dr Cash $197,200

    Cr Common stock $98,600

    Cr Paid-in capital in excess of par $98,600

    Second issue of shares:

    Dr Cash $85,800

    Cr Common stock $37,400

    Cr Paid-in capital in excess of par $48,400

    Shareholders equity section:

    Common stock ($98,600+$37,400) $136,000

    Paid in capital ($98,600+$48,400) $147,000

    Retained earnings $7,300

    Total shareholders' equity $290,300

    Explanation:

    First issue of shares:

    cash proceeds 5,800*$34=$197,200.00

    split into common stock $17*5,800=$98,600.00

    paid-in capital in excess of par ($197,200-$98,600) = $98,600.00

    second issue of shares:

    cash proceeds 2,200*$39=$ 85,800.00

    split into common stock $17*2200=$ 37,400.00

    paid-in capital in excess of par ($85,800-$37,400) = $48,400.00
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