ncentive Corporation was authorized to issue 12,000 shares of common stock, each
ID: 2571702 • Letter: N
Question
ncentive Corporation was authorized to issue 12,000 shares of common stock, each with a $2 par value. During its first year, the following selected transactions were completed:
Issued 5,100 shares of common stock for cash at $21 per share.
b. Issued 1,100 shares of common stock for cash at $24 per share.
Complete the table below, indicating the account, amount, and direction of the effect for the above transactions. (Enter any decreases to account balances with a minus sign.
Prepare the journal entry required for each of these transactions. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field.)
1
Record the issuance of 5,100 shares of common stock with a par value $2 for a price of $21 per share.
2
Record the issuance of 1,100 shares of common stock with a par value $2 for a price of $24 per share
Prepare the stockholders’ equity section as it should be reported on the year-end balance sheet. At year-end, the accounts reflected Net income of $200.
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Incentive Corporation has $49,000 in the company’s bank account. What is the maximum amount of cash dividends the company can declare and distribute?
Maximum amount of cash dividends=
ncentive Corporation was authorized to issue 12,000 shares of common stock, each with a $2 par value. During its first year, the following selected transactions were completed:
Explanation / Answer
Answer
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Common Stock
Paid up capital in excess
a.
$107100
[5100 x $21]
=
+
$10200 [5100 x $2]
$96900 [5100 x $19]
b.
$26400
[1100 x $24]
=
+
$2200 [1100 x $2]
$24200 [1100 x $22]
General Journal
Dr
Cr
a.
Cash ($21)
$107100
Common Stock ($2)
$10200
Paid up capital in excess of Par ($19)
$96900
b.
Cash ($24)
$26400
Common Stock ($2)
$2200
Paid up capital in excess of Par ($22)
$24200
INCENTIVE CORPORATION
Balance Sheet (Partial)
At December 31
Stockholders’ Equity
Contributed Capital:
Common Stock (6200 shares at $2 par per share0
$12400
Paid in capital in excess of Par [96900 + 24200]
$121100
Total Contributed Capital
$133500
Retained Earnings:
Net Income
$200
Total Stockholders’ Equity
$133700
The Incentive Corporation has $49000 in bank account. However it can declare and distribute all of it as dividend. The Net Income earned by the corporation is $200 for the year.
Hence, the maximum cash dividend will be restricted to the maximum amount of $200
Assets
=
Liabilities
+
Stockholders’ Equity
Cash
Common Stock
Paid up capital in excess
a.
$107100
[5100 x $21]
=
+
$10200 [5100 x $2]
$96900 [5100 x $19]
b.
$26400
[1100 x $24]
=
+
$2200 [1100 x $2]
$24200 [1100 x $22]
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