Stockholders' Equity: Transactions and Statement The stockholders' equity section of Night Corporation's balance sheet at January 1 follows: Common stock, $4 par value, 300,000 shares authorized, 60.000 shares 240,000 issued, 6,000 shares in treasury Additional paid-in capital In excess of par value 360.000 From treasury stock 22,500 382.500 Retained earnings 261.000 883.500 Less: Treasury stock (6,000 shares) at cost 103,500 Total Stockholders†Equity 780,000 The following transactions affecting stockholders†equity occurred during the year: Jan. 8 Issued 15,000 shares of previously unissued common stock for $16 cash per share. Mar. 12 Sold all of the treasury shares for $21 cash per share. June 30 Deciared a five percent stock dividend on all outstanding shares of comman stock. The market value of the stock was $19 per share. July 10 Issued the stock dividend declared on June 30. Oct. 7 Acquired 2.500 shares of common stock as treasury stock at $20 cash per share. Dec. 18 Deciared a cash dividend of 51.00 per outstanding common share, payable on january 9 to stockholders of record on December 31. Required a. Prepare journal entries to record the foregoing transactions. b. Prepare a statement of stockholdersâ€M equity. Net income for the year is $255,750.
Reporting Cash Flows
Reporting of cash flows means a statement of cash flow which is a financial statement. A cash flow statement is prepared by gathering all the data regarding inflows and outflows of a company. The cash flow statement includes cash inflows and outflows from various activities such as operating, financing, and investment. Reporting this statement is important because it is the main financial statement of the company.
Balance Sheet
A balance sheet is an integral part of the set of financial statements of an organization that reports the assets, liabilities, equity (shareholding) capital, other short and long-term debts, along with other related items. A balance sheet is one of the most critical measures of the financial performance and position of the company, and as the name suggests, the statement must balance the assets against the liabilities and equity. The assets are what the company owns, and the liabilities represent what the company owes. Equity represents the amount invested in the business, either by the promoters of the company or by external shareholders. The total assets must match total liabilities plus equity.
Financial Statements
Financial statements are written records of an organization which provide a true and real picture of business activities. It shows the financial position and the operating performance of the company. It is prepared at the end of every financial cycle. It includes three main components that are balance sheet, income statement and cash flow statement.
Owner's Capital
Before we begin to understand what Owner’s capital is and what Equity financing is to an organization, it is important to understand some basic accounting terminologies. A double-entry bookkeeping system Normal account balances are those which are expected to have either a debit balance or a credit balance, depending on the nature of the account. An asset account will have a debit balance as normal balance because an asset is a debit account. Similarly, a liability account will have the normal balance as a credit balance because it is amount owed, representing a credit account. Equity is also said to have a credit balance as its normal balance. However, sometimes the normal balances may be reversed, often due to incorrect journal or posting entries or other accounting/ clerical errors.
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