Reporting Stockholders’ Equity and Determining Dividend Policy
Tarrant Corporation was organized in 2011 to operate a financial consulting business. The charter authorized the following capital stock: common stock. par value $I0 per share, 11,500 shares. During the first year, the following selected transactions were completed:
a. Sold and issued 5,600 shares of common stock for cash at $20 per share.
b. Sold and issued 1,000 shares of common stock for cash at $25 per share.
c. At year-end. the accounts reflected a $6,000 loss. Because a loss was incurred, no income tax expense was recorded.
Required:
1. Give the journal entry required for each of these transactions.
2. Prepare the stockholders’ equity section as it should be reported on the yea r-end balance sheet.
3. Can the company pay dividends at this time? Explain.
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