Choctaw Co. completed the following transactions in 2018, the first year of oper
ID: 2400595 • Letter: C
Question
Choctaw Co. completed the following transactions in 2018, the first year of operation:
Issued 28,000 shares of $10 par common stock for $10 per share.
Issued 3,800 shares of $20 stated value preferred stock for $20 per share.
Purchased 1,800 shares of common stock as treasury stock for $12 per share.
Declared a $2,800 cash dividend on preferred stock.
Sold 800 shares of treasury stock for $14 per share.
Paid $2,800 cash for the preferred dividend declared in Event 4.
Earned cash revenues of $94,000 and incurred cash expenses of $49,000.
Appropriated $8,800 of retained earnings.
Required
Organize the transaction in accounts under an accounting equation.
Prepare the stockholders’ equity section of the balance sheet as of December 31, 2018.
Explanation / Answer
Answers
Accounting Equation: ASSETS = LIABILITIES + EQUITY
--retained earnings includes Net Income
Event no.
ASSETS
=
LIABILITIES
STOCKHOLDER'S Equity
Income Statement
Cash
=
Liabilities
+
Common Stock
+
Preferred Stock
+
Paid In Capital
+
Retained earnings
+
Treasury Stock
Revenues
Expenses
Net Income
1
$ 2,80,000.00
=
+
$ 2,80,000.00
+
+
+
+
$ -
2
$ 76,000.00
=
+
+
$ 76,000.00
+
+
+
$ -
3
$ (21,600.00)
=
+
+
+
+
+
$ (21,600.00)
$ -
4
=
$ 2,800.00
+
+
+
+
$ (2,800.00)
+
$ -
5
$ 11,200.00 [800 x 14]
=
+
+
+
$ 1,600.00 [800 x 2]
+
+
$ 9,600.00 [800 x 12]
$ -
6
$ (2,800.00)
=
$ (2,800.00)
+
+
+
+
+
$ -
7
$ 45,000.00
=
+
+
+
+
$ 45,000.00
+
$ 94,000.00
$ 49,000.00
$ 45,000.00
8
=
$ 8,800.00
+
+
+
+
$ (8,800.00)
+
$ -
Ending balance
$ 3,87,800.00
=
$ 8,800.00
+
$ 2,80,000.00
+
$ 76,000.00
+
$ 1,600.00
+
$ 33,400.00
+
$ (12,000.00)
$ 94,000.00
$ 49,000.00
$ 45,000.00
The stockholders’ equity section of the balance sheet as of December 31, 2018
Common Stock [28,000 issued, 27,000 outstanding, $10 par]
$ 2,80,000.00
Preferred Stock [3800 issued and outstanding , $20 par]
$ 76,000.00
Paid In Capital
$ 1,600.00
Retained earnings
$ 33,400.00
$ 3,91,000.00
Treasury Stock [1000 shares at $12]
$ (12,000.00)
Total Stockholder's Equity
$ 3,79,000.00
Event no.
ASSETS
=
LIABILITIES
STOCKHOLDER'S Equity
Income Statement
Cash
=
Liabilities
+
Common Stock
+
Preferred Stock
+
Paid In Capital
+
Retained earnings
+
Treasury Stock
Revenues
Expenses
Net Income
1
$ 2,80,000.00
=
+
$ 2,80,000.00
+
+
+
+
$ -
2
$ 76,000.00
=
+
+
$ 76,000.00
+
+
+
$ -
3
$ (21,600.00)
=
+
+
+
+
+
$ (21,600.00)
$ -
4
=
$ 2,800.00
+
+
+
+
$ (2,800.00)
+
$ -
5
$ 11,200.00 [800 x 14]
=
+
+
+
$ 1,600.00 [800 x 2]
+
+
$ 9,600.00 [800 x 12]
$ -
6
$ (2,800.00)
=
$ (2,800.00)
+
+
+
+
+
$ -
7
$ 45,000.00
=
+
+
+
+
$ 45,000.00
+
$ 94,000.00
$ 49,000.00
$ 45,000.00
8
=
$ 8,800.00
+
+
+
+
$ (8,800.00)
+
$ -
Ending balance
$ 3,87,800.00
=
$ 8,800.00
+
$ 2,80,000.00
+
$ 76,000.00
+
$ 1,600.00
+
$ 33,400.00
+
$ (12,000.00)
$ 94,000.00
$ 49,000.00
$ 45,000.00
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