Question

12-6

anding on March ch 1.10, and 31 rch 1, the board of directors declared a cash dividend of Exercise 12-4 Cash dividend L04 On March 1, the board of direct 127.000 shares issued and outstandi record on March 10, pavable March 31. There were 141 scord the entries for March 1. 10. 2 tional shares had been issued during the month. Record the er Exercise 12-5 Issuing shares LO3, 4 Mainland Resources Inc. began operat occurred during the first month of operations. llowing equity trans: Resources Inc. began operations on June 5, 2020. Journalize the follow counting and legale 2020 June 5 5 16 15,700 on the com Gave 4,000 common share Gave 4,000 common shares to the organizers of the corporation in exchange for accon valued at $85.200. Received $23 cash per share for the issuance of 82,000 common shares. Issued 10.000 preferred shares for cash of $46 per share. 8,000 common shares were issued to a creditor who was owed $137.000. The board of directors declared a cash dividend of 2 h dividend of $20,200 on the preferred shares and $5 70 shares to shareholders of record on June 20. payable July 1. 157.000 common shares were issued in exchange for machinery with a lar market value of shares were actively trading on this date et $17,00 per share. The dividends declared on June 18 were paid. 18 e of $2.869.000. The SU July 1 number of com Exercise 12-6 Issuing shares; equity LO2, 3, 4 CHECK FIGURE: b. Total equity = $413,500 westby Corp., a high school uniform manufacturer, was authorized to issue an unlimited number shares. During January 2020. its first month of operations, the following selected transactions or ansactions occurred. Jan. 1 5 00D 15 1 1.000 shares were issued to the organizers of the corporation. The total value of the shares was determined to be $12,000, 15.000 shares were said to various shareholders for $13.50 each. The board of directors declared a cash dividend of $0.75 per common share to shareholders of record on 19. payable January 31. liability 4.000 shares were issued in exchange for a special piece of land with a book value of $48.000, but no determined Fair Market Value. The shares were actively trading on this date at $11.50 per share. Closed the Income Summary account, which showed a credit balance of $ 165,000. Paid the dividends declared on January 15. then - 20 Horm SD 31 31 Required a. Journalize the above transactions. b. Prepare the equity section of Westby's balance sheet at January 31, 2020. c. What was the average issue price per common share? 842

Answer 1

Part a - Journal Entries

Date	Particulars	Dr. Amt ($)	Cr. Amt ($)
1-Jan	Cash A/c	12,000
	Common Stock		12,000
	(1000 shares issued to organizers for $12000 @ $12/share)
5-Jan	Cash A/c	202,500
	Common stock		180,000
	Paid in capital in excess of par value ($1.5 per share *15000 shares)		22,500
	(15000 shares issued to shareholders @ $13.5 each, i.e. at a premium of $1.5/share)
15-Jan	Retained Earnings	12,000
	Dividend Payable A/c		12,000
	(Dividend declared as $0.75/share for shares issued as on Jan19 to be paid on Jan 31)
20-Jan	Land (Property, Plant, Equipment)	46,000
	Discount on Common Stock	2,000
	Common Stock		48,000
	(Land purchased in exchange of stock. Land value is recorded at market value of shares issued since fair market value of land is not available)
31-Jan	Dividend Payable A/c	12,000
	Cash A/c		12,000
	(Dividend declared on Jan15 is paid out)
31-Jan	Income summary	165,000
	Retained Earnings		165,000

Part b - Equity section of Westby's Balance sheet as on 31st January, 2020

Particulars	Amount ($)
Common Stock
(20,000 shares at a par value of $12/share)	240,000
Additional Paid -in Capital on Common Stock (Paid in capital in excess of par value less discount on common stock)	20,500
Retained Earnings (Transfer from income summary less dividend paid)	153,000
Total Stockholders Equity	413,500

Part c - Average issue price per common share

Total proceeds from issue of shares (in cash or kind)	$      260,500
Total number of shares	20,000
Simple average issue price per share	$           13.03