Great Adventures Problem 10-1 The following information applies to the questions
ID: 2476788 • Letter: G
Question
Great Adventures Problem 10-1 The following information applies to the questions displayed below. Tony and Suzie purchased land costing $500,000 for a new camp in January 2017. Now they need money to build the cabins, dining facility, a ropes course, and an outdoor swimming pool. Tony and Suzie first checked with Summit Bank to see if they could borrow another million dollars, but unfortunately the bank turned them down as too risky. Undeterred, they promoted their idea to close friends they had made through the outdoor clinics and TEAM events. They decided to go ahead and sell shares of stock in the company to raise the additional funds for the camp. Great Adventures has two classes of stock authorized: 9%, $10 par preferred, and $1 par value common. When the company began on July 1, 2015, Tony and Suzie each purchased 12,500 shares of $1 par value common stock at $1 per share. The following transactions affect stockholders' equity during 2017, its third year of operations: Jul. 2 Issue an additional 120,000 shares of common stock for $10 per share. Sep. 10 Repurchase 12,000 shares of its own common stock (i.e., treasury stock) for $13 per share. Nov.15 Reissue 6,000 shares of treasury stock at $14 per share. Dec. 1 Declare a cash dividend on its common stock of $139,000($1 per share) to all stockholders of record on December 15. Dec.31 Pay the cash dividend declared on Dec. 1Explanation / Answer
1. Jul 2 Cash A/c Dr $1200000
To Common Stock $120000
To Capital in excess of par $1080000
(Being common stock issued at a premium of $9 per share)
Sept 10 Treasury Stock Dr $156000
To Cash A/c $156000
(Being Treasury stock purchased @ $13 per share)
Nov 15 Cash Dr $84000
To Treasury Stock(6000*$14) $84000
(Being 6000 Treasury stock reissued @ $14 each)
Dec 1 No entry required. Entry shall be made once dividend is paid.
Dec 31 Dividend A/c Dr $139000
To Cash $139000
(Being cash dividend paid)
2. Stockholders' equity Section:(in $)
Issued Capital :
Common Stock 145000 shares @ $1 each 145000
Treasury Stock 6000 shares ($156000-84000) 72000
Capital in excess of par 1080000
Toal Paid in Capital 1297000
Retained earnings (opening balance) 131000
Add Net income during 2017 141000
Total Stockholders equity 1569000
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