The following transactions occurred at Horton Inc. during its first year of oper
ID: 2382297 • Letter: T
Question
The following transactions occurred at Horton Inc. during its first year of operation:
a. Issued 100,000 shares of common stock at $5 each; 1,000,000 shares are authorized at $1
par value.
b. Issued 10,000 shares of common stock for a building and land. The building was appraised
for $20,000, but the value of the land is undeterminable. The stock is selling for $10 on the
open market.
c. Purchased 1,000 shares of its own common stock on the open market for $16 per share.
d. Declared a dividend of $0.10 per share on outstanding common stock. The dividend is to be
paid after the end of the first year of operations. Market value of the stock is $26.
e. Declared a 2-for-1 stock split. The market value of the stock was $37 before the stock split.
f. Reported $180,000 of income for the year.
Required
1. Indicate each transaction
Explanation / Answer
The following transactions occurred at Horton Inc. during its first year of operation:
a. Issued 100,000 shares of common stock at $5 each; 1,000,000 shares are authorized at $1
par value.
Issued 100,000 shares of common stock at $5 each, 1,000,000 shares are authorized as $1 per value.
Increase assets by 500,000
Increase stockholder's equity 500,000
b. Issued 10,000 shares of common stock for a building and land. The building was appraised
for $20,000, but the value of the land is undeterminable. The stock is selling for $10 on the
open market.
Issued 10,000 shares of common stock for a building and land. The building was appraised for $20,000, but the value of the land is undetermined. The stock is selling for $10 on the open market.
Increase assets 100,000
Increase stockholder's equity 100,000
c.Purchased 1,000 shares of its own common stock on the open market for $16 per share.
Purchase 1,000 shares of its own common stock on the open market at $16 per share.
Increase assets 16,000
Increase stockholder's liability 16,000
d. Declared a dividend of $0.10 per share on outstanding common stock. The dividend is to be
Declared a dividend of $0.10 per share on outstanding common stock. The dividend is to be paid after the end of the first year of operations. Market value of the stock is $26.
Increase liabilities 11,100
Decrease stockholder's liability 11,100
e. Declared a 2-for-1 stock split. The market value of the stock was $37 before the stock split.
Declared a 2 for 1 stock split. The market value of the stock was $37 before the stock split.
Does not affect any.
f. Reported $180,000 of income for the year.
Reported $180,000 of incom for the year.
Increase assets 180,000
Increase stockholder's equity 180,000
1. Indicate each transaction
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