Question

2. Top of the World, Ltd, reported the following summarized balance sheet at December 31, 2018: Assets: Current assets Property and equipment, net $40,400 89,000 Total assets $129.400 Liabilities: Liabilities $41,000 Stockholders' equity: Common stock, $0.02 par (100,000 shares issued and outstanding) 2,000 Preferred stock, So. Os par (10,000 shares issued and outstanding) 500 Additional paid in capital 68,500 Retained earnings 17,400 Total liabilities and equity $129.400 During 2019, Top of the World, Ltd. completed these transactions that affected stockholders' equity: March 3 Issued 100 shares of preferred stock for $8 per share. May 5 Issue 7,500 shares of common stock for $15 per share. July 6 Declared a cash dividend of $0.20 per preferred share and $0.05 per common share, payable to all stockholders of record on July 15, 2019 July 31 Paid the cash dividend. November 11 Reacquired 400 shares of common stock as treasury stock, paying $20 per share

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Answer 1

Debit Credit Top of the World, Ltd. Date Account 3-Mar Cash Preferred Stock Additional Paid in Capital 800 Calculation =100*8 =100*0.05 5 795 112,500 5-May Cash Common Stock Additional Paid in Capital =7,500*15 =7,500*0.02 150 112,350 6-Jul Preferred Dividends Common Dividends Dividends Payable 2,020 5,375 =(10,000+100) *0.20 =(100,000+7,500) *0.05 7,395 7,395 =73000*29 31-Jul Dividends Payable Cash 7,395 8,000 -400*20 11-Nov Treasury Stock Cash 8,000

Date Top of the World, Ltd. T Accounts Date Debit Date Credit Common Stock Op bal $ 2,000 5-May $ 150 Debit Date Credit Preferred Stock Op bal $ 3-Mar $ 500 5 505 Bal. $ 2,150 Additional Paid in Capital Op bal $ 68,500 3-Mar $ 795 5-May $ 112,350 Bal. $ Retained Earnings Op bal $ 2,020 31-Dec $ 5,375 17,400 16,240 6-Jul $ 6-Jul $ $ 181,645 Sal. $ 26,245 Treasury Stock Op bal $ 11-Nov $ 8,000 Bal. $ 8,000

Top of the World, Ltd. Statement of Shareholders Equity For the Year Ended December 31, 2019 Beginning balance, 1/1 CS Issuances PS Issuances Treasury stock purchases Add: Net Income (from 1/S) Less: Dividends Ending Balance, 12/31 Common Stock Preferred Stock Additional Paid in Capital Retained Earnings Treasury Stock Total SHE 2,000 500 68,500 17,400 88,400 150 112,350 112,500 795 800 (8,000) (8,000) 16,240 16,240 (7,395) (7,395) 2,150 505 181,645 26,245 (8,000) 202,545

Top of the World, Ltd. Balance Sheet - Partial As of December 31, 2019 Stockholders Equity Paid in Capital Common Stock - $0.02 par (107,500 shares issued & 107,100 shares outstanding) Preferred Stock - $0.05 par value (10,100 shares issued & outstanding) Additional Paid in Capital Total Paid in Capital Retained Earnings 2,150 505 181,645 184,300 26,245 210,545 (8,000) 202,545 Less: Treasury Stock (400 shares @ $20 per share) Total Stockholders Equity