Knapp Industries began business on January 1, 2018 by issuing all of its 1,000,000 authorized shares of its $1 par value common stock for $40 per share. On June 30, Knapp declared a cash dividend of $2 per share to stockholders of record on July 31. Knapp paid the cash dividend on August 30. On November 1, Knapp reacquired 200,000 of its own shares of stock for $50 per share. On December 22, Knapp resold 100,000 of these shares for $60 per share.Required:Prepare the stockholders' equity section of the balance sheet as of December 31, 2018 assuming that the net income for the year was $6,000,000. Prepare the stockholders' equity section of the balance sheet as of December 31, 2018 assuming that the net income for theyear was $6,000,000.Knapp IndustriesStockholders' EquityBalance Sheet as of December 31, 2018Additional Paid-in CapitalCommon Stock1,000,000Additional Paid-In Capital, Treasury Stock1,000,000Retained Earnings5,000,0007,000,000Less: Treasury Stock5,000,000Total Stockholders' Equilty$ 41,000,000

The purchase of own shares is known as treasury stock.

Answered: Knapp Industries began business on…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Knapp Industries began business on January 1, 2018 by issuing all of its 1,000,000 authorized shares of its $1 par value common stock for $40 per share. On June 30, Knapp declared a cash dividend of $2 per share to stockholders of record on July 31. Knapp paid the cash dividend on August 30. On November 1, Knapp reacquired 200,000 of its own shares of stock for $50 per share. On December 22, Knapp resold 100,000 of these shares for $60 per share.

Required:

Prepare the stockholders' equity section of the balance sheet as of December 31, 2018 assuming that the net income for the year was $6,000,000.

Prepare the stockholders' equity section of the balance sheet as of December 31, 2018 assuming that the net income for the
year was $6,000,000.
Knapp Industries
Stockholders' Equity
Balance Sheet as of December 31, 2018
Additional Paid-in Capital
Common Stock
1,000,000
Additional Paid-In Capital, Treasury Stock
1,000,000
Retained Earnings
5,000,000
7,000,000
Less: Treasury Stock
5,000,000
Total Stockholders' Equilty
$ 41,000,000

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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