Problem 2 Prepare the journal entries (in good form) and the shareholder equity

Question

Problem 2 Prepare the journal entries (in good form) and the shareholder equity section of the Balance Sheet at 12131/97 TADEM, Inc. had the following stockholders' equity accounts on 1/1/97: common stock ($5 par) $600,000, Paid-In Capital $230,000, and Retained Earnings of $160,000. During 1997 the company had the following transactions occurred: 1. Issued 10,000 additional shares of common stock for $80,000 2. Declared and paid a cash dividend of $40,000 3. Net income was $150,000 What is the book value per share of TADEM?

Explanation / Answer

Journal entries TADEM INC. No. Account Titles Debit Credit Balance Sheet (Partial) 1 Cash $80,000.00 At December 31,1997 Common stock $50,000.00 Stockholders Equity Additional Paid in capital $30,000.00 Contributed Capital Common stock,$5 Par Value,130000 shares Issued $650,000.00 2-a Retained Earnings $40,000.00 Additional Paid In Capital - Common Stock $260,000.00 Dividend Payable $40,000.00 Total Contributed Capital $910,000.00 Retained Earnings $270,000.00 2-b Dividend Payable $40,000.00 Total Stockholders Equity $1,180,000.00 Cash $40,000.00 3 Income Summary $150,000.00 Book value per share of TADEM = Total stockholders equity / No.of common shares outstanding Retained Earnings $150,000.00 Book value per share of TADEM = $11,80,000 / 130000 shares = $9.08 per share

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