Academic Integrity: tutoring, explanations, and feedback — we don’t complete graded work or submit on a student’s behalf.

Horace Company had the following transactions during 2014, its first year of bus

ID: 2475253 • Letter: H

Question

Horace Company had the following transactions during 2014, its first year of business. Issued 5,000 shares of 55 par common stock for cash at dollar15 per share. Issued 7,000 shares of common stock on May 1 to acquire a factory building from Barkley Company. Barkley had acquired the building in 2010 at a price of dollarl 50,000. Horace estimated that the building was worth dollar 75,000 on May 1, 2014. Issued 2,000 shares of stock on June 1 to acquire a patent. The accountant has been unable to estimate the value of the patent but has determined that Horace'i common stock was selling at dollar 25 per share on June1.Required Identify and analysze the effect of each transaction. Determine the balance sheet amounts for common stock and additional paid-in capital.

Explanation / Answer

Answer:

a. Dr Cash $75,000
Cr Common stock $25,000
Cr Paid-in Capital in Excess of Par—Common $50,000

b. Dr Building $175,000
Cr Common stock $35,000
Cr Paid-in Capital in Excess of Par—Common $140,000

c. Dr Patent $50,000
Cr Common stock $10,000
Cr Paid-in Capital in Excess of Par—Common $40,000

Answer:2 Common stock=25000+35000+10000=$60000

Additional paid in capital=50000+140000+40000=230000