BUSAC 186-GRABER INC. BALANCE SHEET (partial) STOCKHOLDER’S EQUITY

BUSAC 186-GRABER INC. BALANCE SHEET (partial) STOCKHOLDER’S EQUITY

Subject: Business    / Accounting
Question
GRABER INC.
BALANCE SHEET (partial)
STOCKHOLDER’S EQUITY:
Paid-in capital:
Capital Stock:
9% preferred stock, $100 par value, cumulative
10,000 shares authorized, 6,000 shares issued
and outstanding
Common Stock, no par, $5 stated value, 500,000 shares
authorized, 400,000 shares issued, and 390,000
shares outstanding
Total Capital Stock 2,000,000
2,600,000 Additional paid-in capital:
In excess of par value—preferred stock
$ 30,000
In excess of stated value—common stock
1,050,000
Total additional paid-in capital
TOTAL PAID-IN CAPITAL 1,080,000
3,680,000 Retained Earnings
Total paid-in capital and retained earnings
Less: Treasury stock—common (10,000 shares)
TOTAL STOCKHOLDER EQUITY $600,000 1,160,000
4,840,000
(80,000)
4,760,000 KEY CONCEPTS
Shares authorized, issued and outstanding
Common Stock vs. Preferred Stock (Dividend preference, Cumulative/in-arrears)
Par (stated) value vs. market value
RULE: ALWAYS CREDIT STOCK AT PAR (STATED) VALUE!
Treasury stock = buy back its own outstanding common stock, recorded at COST
Restrictions of Retained Earnings
Cash and stock dividends (Declaration Date, Record Date, Payment/Issue Date)
Stock splits EXAMPLES: (entries took place in the next year and are independent of one another)
A. Sold (issued) 1,000 shares of common stock for cash at $13/share
DATE
ACCOUNT TITLE
DEBIT CREDIT B. Sold (issued) 100 shares of preferred stock for cash at $125/share
DATE
ACCOUNT TITLE
DEBIT CREDIT C. Purchased 100 shares of our own common stock for $17 (Treasury Stock)
DATE ACCOUNT TITLE DEBIT CREDIT D. October 1, Declared the annual CASH DIVIDEND on preferred stock and
a $0.10 CASH DIVIDEND on Common Stock
DATE
Oct. 1 ACCOUNT TITLE DEBIT CREDIT F. Nov. 10, paid the cash dividends to common and preferred stock
DATE
ACCOUNT TITLE
DEBIT
Nov. 10 CREDIT E. October 20 is the record date.
NO JOURNAL ENTRY G. Determined that Net Income for the year was $355,000
DATE
Dec. 31 ACCOUNT TITLE DEBIT CREDIT H. July 1, Declared a 10% STOCK DIVIDEND to common shareholders only,
the market price of the stock is $18/share
DATE
July 1 ACCOUNT TITLE DEBIT CREDIT DEBIT CREDIT I. July 20 is the record date
NO JOURNAL ENTRY
J. Aug. 1 issued the shares for the STOCK DIVIDEND
DATE
Aug. 1 ACCOUNT TITLE

1. What is the debit amount to Cash for A?

2. What is the credit amount to Common Stock for A?

3. What is the credit amount to Additional Paid-in Capital (APIC) for A?

4. What is the credit amount to Additional Paid-in Capital (APIC) for B?

5. What is the debit amount to Treasury Stock for C?

6. What is the credit amount to Dividends Payable – Preferred Stock for D?

7. What is the debit amount to Dividends Payable – Common Stock for F?

8. What is the credit amount to Common Stock for J?