At the beginning of the year, a company has issued a total of 500,000 shares of common stock, including 20,000 shares of treasury stock held. During the year, the company issues 100,000 additional shares of common stock and resells 10% of the treasury stock held. On December 1, the board of directors declares a cash dividend of $0.20 per share for stockholders on record as of December 20. The dividend is paid on December 25.Required:(a) Calculate the number of outstanding shares of common stock at the end of the year, (b) calculate the total amount of dividends, and (c) record any necessary entries on December 1, December 20, and December 25. (d) Assuming retained earnings at the beginning of the year is $400,000 and net income for the year is $250,000, calculate the ending balance of retained earnings. How would your answers change if the company declared a cash dividend of $0.50 per share?
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.
At the beginning of the year, a company has issued a total of 500,000 shares of common stock, including 20,000 shares of
Required:
(a) Calculate the number of outstanding shares of common stock at the end of the year, (b) calculate the total amount of dividends, and (c) record any necessary entries on December 1, December 20, and December 25. (d) Assuming
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