Question

Tony and Suzie have purchased land for a new camp. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow an additional $1 million, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They decided to go ahead and sell shares of stock in the company to raise the additional funds for the camp.

Great Adventures has authorized $1 par value common stock. When the company began on July 1, 2021, Tony and Suzie each purchased 10,000 shares (20,000 shares total) of $1 par value common stock at $1 per share. The following transactions affect stockholders’ equity during the remainder of 2022:

November	5		Issue an additional 120,000 shares of common stock for $10 per share.
November	16		Purchase 12,000 shares of its own common stock (i.e., treasury stock) for $25 per share.
November	24		Resell 6,000 shares of treasury stock at $26 per share.
December	1		Declare a cash dividend on its common stock of $13,800 ($0.10 per share) to all stockholders of record on December 15.
December	20		Pay the cash dividend declared on December 1.
December	31		Pay $850,000 for construction of new cabins and other facilities. The entire expenditure is recorded in the Buildings account.

Required:

1. Record each of these transactions. (If no entry is required for a particular transaction/event, select "No Journal Entry Required" in the first account field.)

2. Great Adventures has net income of $39,241 in 2022. Retained earnings at the beginning of 2022 was $34,450. Prepare the stockholders’ equity section of the balance sheet for Great Adventures as of December 31, 2022. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

Journal Entries Post Account Title and Explaination Debit Credit Date Ref. S Cash (120000x$10) 1,200,000.00 Nov.5 Common Stock (120000x$1) Paid In Capital in Excess of Par - Common $ 120,000.00 1,080,000.00 (To record issue of Common Stock) Nov.16 Treasury Stock (12000x$25) 300,000.00 Cash $ 300,000.00 |(To record Purchase of treasury stock) Cash (6000x$26) Nov.24 $ 156,000.00 Treasury Stock (6000x$25) Additional Paid In Capital - Treasury Stock 150,000.00 6,000.00 |(To record sale of treasury Stock) A EA

Retained Earnings $ Dec.1 13,800.00 Dividends Payable (To record Cash Dividend declared) 13,800.00 Dividends Payable 13,800.00 Dec.20 Cash $ 13,800.00 (To record Payment Dividends) Dec.31 Buildings $ 850,000.00 Cash 850,000.00 |(To record cash paid for construction expenses of Building)

Stockholders Equity Common Stock of $1 Par, 140000shares outstanding Paid In Capital in Excess of Par - Common Additional Paid In Capital - Treasury Stock Total Paid In Capital Add: Retained Earnings 140,000.00 1,080,000.00 6,000.00 1,226,000.00 $ $ $ $ $ Total Paid In Capital and Retained Earnings 34,450.00 73,691.00 1,299,691.00 (13,800.00) 1,285,891.00 (150,000.00) 1,135,891.00 Add: Net Income 39,241.00 $ $ $ $ $ Less: Dividends Less: Treasury Stock (6000x$25) Total Stockholders' Equity

Answer 2

On Dec 1. it isn't a credit to Retained Earnings