Question

Question text Identifying and Analyzing Financial Statement Effects of Stock Transactions The stockholders' equity of Verrecchia Company at December 31, 2013, follows: Common stock, $5 par value, 350,000 shares authorized; 250,000 shares issued and outstanding $1,250,000 Paid-in capital in excess of par value 600,000 Retained earnings 346,000 During 2014, the following transactions occurred: Jan. 5 Issued 10,000 shares of common stock for $12 cash per share. Jan. 18 Repurchased 4,000 shares of common stock at $15 cash per share. Mar. 12 Sold one-fourth of the treasury shares acquired January 18 for $18 cash per share. July 17 Sold 500 shares of the remaining treasury stock for $13 cash per share. Oct. 1 Issued 5,000 shares of 8%, $25 par value preferred stock for $35 cash per share. This is the first issuance of preferred shares from the 50,000 authorized shares. (a) Use the financial statement effects template to indicate the effects of each transaction. Use negative signs with your answers, when appropriate. Balance Sheet Transaction Cash Asset + Noncash Assets = Liabilities + Contributed Capital + Earned Capital Jan. 5 Answer Answer Answer Answer Answer Jan. 18 Answer Answer Answer Answer Answer Mar. 12 Answer Answer Answer Answer Answer July. 17 Answer Answer Answer Answer Answer Oct. 1 Answer Answer Answer Answer Answer Income Statement Revenue - Expenses = Net Income Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer Answer (b) Prepare the December 31, 2014, stockholders' equity section of the balance sheet assuming that the company reports net income of $65,800 for the year. Use a negative sign with your answer for treasury stock. Stockholders' Equity Paid-in capital 8% Preferred stock, $25 par value, 50,000 shares authorized, 5,000 shares issued and outstanding Answer Common stock, $5 par value, 350,000 shares authorized; 260,000 shares issued Answer Answer Additional paid-in capital Paid-in capital in excess of par value-preferred stock Answer Paid-in capital in excess of par value-common stock Answer Paid-in capital from treasury stock (use a negative sign with your answer) Answer Answer Total paid-in capital Answer Retained earnings Answer Answer Less: Treasury stock (2,500 shares) at cost Answer Total Stockholders' Equity Answer

Answer 1

Answer to Requirement (a). Balance Sheet Income Statement Non-Cash Assets Earned Capital Net Income = Liabilities + Revenue Expenses = Transaction Jan 5 Jan 18 Mar 12 July 17 Oct 1 Cash Assets + 120,000 -60,000 + 18,000 + 6,500 + 175,000 + Contribute d Capital + 120,000 + -60,000 + 18,000 + 6,500 + 175,000 +

Credit Date Jan 5 Debit 12,000 5,000 7,000 Jan 18 60,000 60,000 Mar 12 18,000 General Journal Cash (10,000 * $12) Common Stock (10,000 * $5) Paid-in Capital in excess of Par Value - Common Stock Treasury Stock (4,000 * $15) Cash Cash (4,000 * 1/4* $18) Treasury Stock (4,000 * 1/4* $15) Paid-in Capital - Treasury Stock Cash (500 * $13) Paid-in Capital - Treasury Stock Treasury Stock (500 *$15) Cash (5,000 * $35) Preferred Stock (5,000 * $25) Paid-in Capital in excess of Par Value - Preferred Stock 15,000 3,000 July 17 6,500 1,000 7,500 Oct 1 175,000 125,000 50,000

125,000 Requirement b. Stockholders' Equity Paid-in Capital: |8% Preferred Stock, $25 Par Value, 50,000 Shares Authorized, 5,000 Shares issued and Outstanding Common Stock, $5 Par Value, 350,000 Shares Authorized; 260,000 Shares Issued Additional Paid-in Capital: Paid-in Capital in excess of Par Value - Preferred Stock Paid-in Capital in excess of Par Value - Common Stock Paid-in Capital from Treasury Stock Total Paid-in Capital Retained Earnings 50,000 175,000 50,000 7,000 2,000 59,000 234,000 65,800 299,800 37,500 262,300 Less: Treasury Stock (2,500 Shares) at Cost Total Stockholders' Equity