Question

Doulane Marine obtained a charter from the province in January 2017 that authorized 1,000,000 common shares. During the first year, the company earned $429,000 and the following selected transactions occurred in the order given: a. Issued 700,000 common shares at $54 cash per share b. Reacquired and cancelled 25,000 shares at $50 cash per share Required: 1. Indicate the effects of each transaction on the accounting equation. (Enter any decreases to Assets, Liabilities, or Stockholders' Equity with a minus sign.) Assets Liabilites Stockholder's Equity a.

Answer 1

1)
	Assets		=	Liabilities		+	Stockholder's Equity
a.	Cash (700,000*$54)	$37,800,000	=			+	Common Stock	$37,800,000
b.	Cash (25,000*$50)	($1,250,000)	=			+	Treasury Stock	($1,250,000)
Total		$36,550,000	=			+		$36,550,000

2)
Event	General Journal	Debit	Credit
a)	Cash	$37,800,000
	Common Stock		$37,800,000
	(To record the issue of 700,000 shares for cash)
b)	Treasury Stock	$1,250,000
	Cash		$1,250,000
	(To record the purchase of treasury stock by cash)

3)
Shareholders' Equity - December 31, 2017
Contributed Capital:
Common Stock	$37,800,000
Treasury Stock	($1,250,000)
Total contributed capital	$36,550,000
Add: Net Income	$429,000
Total shareholders' Equity	$36,979,000