7 Effect of issuing common stock on the balance sheet Newly formed Electronics S

ID: 2419210 • Letter: 7

Question

7 Effect of issuing common stock on the balance sheet

Newly formed Electronics Services Corporation has 100,000 shares of $10 par common stock authorized. On March 1, 2014, Electronics Services issued 20,000 shares of the stock for $12 per share. On May 2 the company issued an additional 30,000 shares for $15 per share. Electronics Services was not affected by other events during 2014.

Record the transactions in a horizontal statements model like the following one. In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA). Use NA to indicate that an element was not affected by the event. (Enter any decreases to account balances and cash outflows with a minus sign.)

ELECTRONIC SERVICES CORPORATION

HORIZONTAL STATEMENTS MODEL

DATE CASH=LIABILITIES+COMMON STOCK+PAID N CAPITAL REV.-EXPENSE=NET STATEMENT

IN EXCESS INCOME OF CASH FLOW

March 1, 2014

May 1, 2014

b. Determine the amount Electronics Services would report for common stock on the December 31, 2014, balance sheet. COMMON STOCK( )

c. Determine the amount Electronics Services would report for paid-in capital in excess of par.

PAID IN CAPITAL EXCESS OF PAR( )

What amount of total assets would Electronics Services report on the December 31, 2014, balance sheet? TOTAL ASSETS ( )

10 Effect of cash dividends on financial statements

On October 1, 2014, Daster Corporation declared a $59,600 cash dividend to be paid on December 15 to shareholders of record on November 1.

Record the events occurring on October 1 and December 15 in a horizontal statements model like the following one. In the Cash Flow column, indicate whether the item is an operating activity (OA), an investing activity (IA), or a financing activity (FA). The letters NA indicate that an element is not affected by the event. (Enter any decreases to account balances and cash outflows with a minus sign.)

DASTER CORPORATION

HORIZONTAL STATEMENT MODEL

DATE ASSETS=LIABILITIES+COMMON+RETAINED REVENUE-EXPENSES=NET STATEMENT

STOCK EARNINGS INCOME CASH FLOWS

10/01

11/01

12/15

7 Effect of issuing common stock on the balance sheet

Required

ELECTRONIC SERVICES CORPORATION

HORIZONTAL STATEMENTS MODEL

DATE CASH=LIABILITIES+COMMON STOCK+PAID N CAPITAL REV.-EXPENSE=NET STATEMENT

IN EXCESS INCOME OF CASH FLOW

March 1, 2014

May 1, 2014

b. Determine the amount Electronics Services would report for common stock on the December 31, 2014, balance sheet. COMMON STOCK( )

c. Determine the amount Electronics Services would report for paid-in capital in excess of par.

PAID IN CAPITAL EXCESS OF PAR( )

Explanation / Answer

ELECTRONIC SERVICES CORPORATION

HORIZONTAL STATEMENTS MODEL

Date

Cash

Liabilities

Common Stock

Paid in Capital In excess of Par

Revenue

Expenses

March. 1, 2014

$ 240,000.00

$ 200,000.00

$ 40,000.00

(20000*12)

(20000*10)

(20000*(12-10)

May. 2, 2014

$ 450,000.00

$ 300,000.00

$ 150,000.00

(30000*15)

(30000*10)

(30000*(15-10)

Amount Electronics Services would report for common stock on the December 31, 2014, balance sheet = 200000+300000 = $500000

PAID IN CAPITAL EXCESS OF PAR

(40000+150000)=

$ 190,000.00

TOTAL PAID IN CAPITAL = (240000+450000) =

$ 690,000.00