1000 shares of 20 par value of stock 2 for 1 split

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1,000 shares of $20 par value of stock 2 for 1 split After the split 2,000 shares of $10 par value stock EXAMPLE: Reynolds, Inc. was incorporated on January 1, 2011. The following events apply to the company’s first year of operation. 1. Issued 2,000 shares of $10 par value common stock at a market price of $25 per share. 2. Earned $35,000 cash revenue. 3. Incurred $25,000 of cash expenses. 4. Declared a $3,000 cash dividend. 5. Paid the cash dividend declared in Event No. 4. 6. Purchase 100 shares of treasury stock for $22. Assets Liabilities Equity 1 Cash Com Stk PIC in excess of p +50,000 (2,000 * 25) + 20,000 +30,000 2 Cash Retained Earnings +35,000 + 35,000 (revenue) 3 Cash Retained earnings - 25,000 - 25,000 (expense) 4 Dividend Payable Retained Earnings + 3,000 - 3,000 (dividends) 5 Cash Dividend Payable - 3,000 - 3,000 6 Cash Treasury stock - 2,200 - 2,200 Net income: revenues – expenses = 35,000 – 25,000 = 10,000 Ending retained earnings = Beginning 0 (assume) + 10,000 net income – 3,000 dividends = 7,000 Equity sections: Common stock 20,000 Paid in Capital (PIC) 30,000 Retained Earnings 7,000 Treasury Stock -2,200 Total equity 54,800 Final Presentation of claims section with new accounts: Liabilities Current liabilities (pd within a year) 8-5
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Chapter 08 - Proprietorships, Partnerships, and Corporations Accounts payable $65,000 Notes payable due 3 months 27,000 Wages payable 51,000 Unearned Revenue 12,000 Current portion of long term debt 16,000 Total current liabilities $171,000 Long term notes payable 85,000 Bonds payable 160,000 Contingent liabilities Note XX Total liabilities $416,000 Stockholder’s Equity Common stock 600,000 Preferred Stock 400,000 paid in capital in excess of par 220,000 Retained Earnings 65,267 Treasury Stock (125,000) Total equity 1,160,267 Total liabilities and equity 1576,267 8-6
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