Effects of Dividends: Baez Company has outstanding 25,000 shares of $10 par common stock. It also has $514,000 of retained earnings. Near the current year-end, the company declares and pays a cash dividend of $1.80 per share and declares and issues a 5% stock dividend. The market price of the stock the day the dividends are declared is $25 per share. What are the journal entries related to the stock dividend. (two transactions) Following is the stockholders equity section of Herrera Corporation at December 31, 20X6 The following transactions, among others, occurred in 20X7. Jan 15 – Issued 1,000 shares of preferred stock for $60 cash per share. Jan 20 – Issued 4,000 shares of common stock at $34 cash per share. May 18 – announced a 2-for-1 common stock split, reducing the par value of the common stock to $10 per share. The number of shares authorized was increased to 100,000 shares. June 1 – Issued 2,000 shares of common stock for $56,000 cash. Sept 1 – Repurchased 2,500 shares of common stock for $16 cash per share. Oct 12 – Sold 900 treasury shares at $19 cash per share. Dec 22 – Issued 500 shares of preferred stock for $57 cash per share. For the above entries, outline the effects of each transaction and the related journal entries. Also prepare the Statement of Equity at year-end, rolling forward from December 31, 20X6 as provided to December 31, 20X7.
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.
- Effects of Dividends: Baez Company has outstanding 25,000 shares of $10 par common stock. It also has $514,000 of
retained earnings . Near the current year-end, the company declares and pays a cash dividend of $1.80 per share and declares and issues a 5% stock dividend. The market price of the stock the day the dividends are declared is $25 per share. - What are the
journal entries related to the stock dividend. (two transactions)
- Following is the
stockholders equity section of Herrera Corporation at December 31, 20X6
The following transactions, among others, occurred in 20X7.
Jan 15 – Issued 1,000 shares of
Jan 20 – Issued 4,000 shares of common stock at $34 cash per share.
May 18 – announced a 2-for-1 common stock split, reducing the par value of the common stock to $10 per share. The number of shares authorized was increased to 100,000 shares.
June 1 – Issued 2,000 shares of common stock for $56,000 cash.
Sept 1 – Repurchased 2,500 shares of common stock for $16 cash per share.
Oct 12 – Sold 900 treasury shares at $19 cash per share.
Dec 22 – Issued 500 shares of preferred stock for $57 cash per share.
For the above entries, outline the effects of each transaction and the related journal entries. Also prepare the Statement of Equity at year-end, rolling forward from December 31, 20X6 as provided to December 31, 20X7.
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