Question

The following table shows the stockholders' equity account for Verataco Company at December 31, 2016. Stockholders' Equity Common stock, $5 par, 500,000 shares authorized; 350,000 shares issued and outstanding Paid-in capital in excess of par value Retained earnings 1,750,000 800,000 634,000 During 2017, the following transactions occurred: January 5 Issued 10,000 shares of common stock for $13 cash per share January 18 Repurchased 4,000 shares of common stock at $16 cash per share March 22 Sold 1,000 of the treasury shares acquired January 18 for $19 cash per share July 17 Sold 500 shares of treasury stock for $14 per share October 1 Issued 5,000 shares (out of 50,000 authorized) of 8%, $25 par value preferred stock for $36 cash per share Use the financial statement effects template to show the effects of each transaction. Prepare the December 31, 2017, stockholders' equity section of the balance sheet assuming the company reports net income of $76,900 for the year and pays no dividends.

Answer 1

Verataco Company Journal Enteries Particulars Debit in $ Credit in $ Date Cash a/c 5.1.2017 Dr. 130000 To Common Stock 50000 To Paid in Capital in excess of par value 80000 (Common Stock issued) Treasury Shares a/c 18.1.2017 Dr. 64000 To Cash 64000 (Treasury shares purchased) 4000 x 16 Cash a/c 22.3.2017 Dr. 19000 To Treasury Shares To Paid in Capital in excess of par value Treasury 16000 3000 (Treasury shares reissued) 1000 x 16 16000;1000 x 19 19000 17.7.2017 Cash a/c Dr. 7000 Paid in Capital in excess of par value - Treasury a/c Dr. To Treasury Shares (Treasury shares reissued) 500 x 14 7000; 500 x 16 8000 1000 8000 1.10.2017 Cash a/c Dr. 180000 To Preferred Stock 125000 To Paid in Capital in excess of par value 55000 (Preferred Stock issued) 50000 x 25 125000; 5000 x 36 180000 31.12.2017 Income Summary a/c Dr. 76900 Retained Earnings 76900 (Profits transferred)

Stockholders Equity Section For the period ending 31.12.2017 Stock Capital Preferred Stock $25 par, 50000 shares authorized; 5000 shares issued and outstanding 125000 Common Stock $5 par, 500000 shares authorized; 360000 shares issued and 357500 shares outstanding 1800000 Total Capital Stock 1925000 Paid in Capital in excess of par value- Preferred Stock 55000 Paid in Capital in excess of par value- Common Stock 880000 Paid in Capital in excess of par value- Treasury 2000 Total Paid In Capital 2862000 Retained Earnings 710900 3572900 Less:Treasury Shares (2500 shares) -40000 Total Shareholders Equity 3532900