136b_W09_MT2

136b_W09_MT2 - 26 The following is relevant to Equity Inc as of(beginning of 2008 I Common stock authorized issued and outstanding shares are

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26. The following is relevant to Equity, Inc. as of December 31, 2007 (beginning of 2008): - Common stock, authorized, issued and outstanding shares are 1,000,000. - Par value of common stock is $1/ share - All of the issued stock originally sold for $10 per share ($1 par and $9 APIC/ share) - Retained earnings is $800,000, and there are no other equity accounts. SUBSEQUENTLY, the following activity took place during the year ended 12/31/08: I. FOR EACH, INSERT THE JOURNAL ENTRY IN THE SPACE PROVIDED January 1, 2008 Received authorization from the Board to issue an additional 500,000 shares. January 15, 2008 January 31, 2008 Repurchase 200,000 shares at a price of $13 per share. February 28, 2008 Sell 100,000 shares held in treasury for $15 per share. March 31, 2008 Sell 60,000 shares held in treasury for $7 per share. April 1, 2008 Retire 12,000 shares held in treasury. May 1, 2008 II. III. . Issued an additional 500,000 shares for $10 per share which cost $150,000 in legal and other costs which were paid directly from the proceeds from the stock sales. Declare and pay a dividend to shareholders in the form of bonds held as an investment by the company. The bonds have a fair value on the date declared of $110,000 but are on the books as an investment at their historical cost of $100,000. Assuming that net income for the year was $2 million, prepare the stockholders' equity section of the balance sheet as of December 31, 2008 Show the equity section described above assuming that in addition to the facts above, the company completed a two for one stock split during the year.
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26. SOLUTION I. Present the journal entry for each date noted above to record the transaction for that date. January 1, 2008 NO ENTRY AUTH. ISSUED TREASURY ALSO OK: 1,000,000 1,000,000 - OPENING Cash 5,000,000 January 15, 2008 500,000 1/1/2006 Common stock 500,000 Cash 4,850,000 500,000 1/15/2006 APIC 4,350,000 Common stock 500,000 200,000 1/31/2006 Cash 150,000 APIC 4,350,000 (100,000) 2/28/2006 (60,000) 3/31/2006 January 31, 2008 (12,000) (12,000) 4/1/2006 Treasury stcok 2,600,000 Cash 2,600,000 1,500,000 1,488,000 28,000 1,460,000 February 28, 2008 Cash 1,500,000 1,000,000 9,000,000 Treasury stock 1,300,000 500,000 4,350,000 APIC treasury stock 200,000 12,000 108,000 1,488,000 13,242,000 March 31, 2008 Cash 420,000 Treasury stock 780,000 APIC treasury stock 200,000 Retained earnings 160,000 2,600,000 1,300,000 200,000 April 1, 2008 780,000 200,000 Common stock 12,000 156,000 - APIC 108,000 364,000 Treasury stock 156,000 Retained earnings 36,000 May 1, 2008 800,000 Investments 10,000 160,000 Gain on investments 10,000 36,000 Retained earnings 110,000 110,000 Investments 110,000 2,000,000 2,494,000 II Common stock, $1 par, 1,500,000 shares authorized, 1,488,000 issued and 1,460,000 outstanding 1,488,000 Additional paid in capital 13,242,000 Retained earnings 2,494,000 Total paid in capital and retained earnings 17,224,000 Less: Cost of Treasury stock, 28,000 shares 364,000 Total stockholders equity 16,860,000 III. Common stock, $.50 par, 3,000,000 shares authorized, 2,976,000 issued and 2,920,000 outstanding 1,488,000 Additional paid in capital 13,242,000 Retained earnings 2,494,000 Total paid in capital and retained earnings 17,224,000 Less: Cost of Treasury stock, 56,000 shares 364,000 Total stockholders equity 16,860,000 RETAINED EARNINGS APIC APIC TREAS. STOCK NUMBER OF SHARES BY TYPE Common stock TREAS. STOCK
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27. The present value of the future payment from Scot discounted at the market rate indicated above is: $170,146 Fill in the blanks in the following amortization schedule for Darlene please (DON’T WORRY ABOUT ROUNDING… IF YOU ARE OFF 1 OR 2 DOLLARS, ITS OK) DATE Payment Interest Balance 170,146 12/31/08 12/31/09 12/31/10 12/31/11 12/31/12 250,000
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This note was uploaded on 01/31/2010 for the course ECON 136B taught by Professor Anderson during the Spring '08 term at UCSB.

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136b_W09_MT2 - 26 The following is relevant to Equity Inc as of(beginning of 2008 I Common stock authorized issued and outstanding shares are

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