Sun Corporation received a charter that authorized the issuance of 114,000 shares of $8 par common stock and 22,000 shares of $100 par, 7 percent cumulative preferred stock. Sun Corporation completed the following transactions during its first two years of operation. Year 1 January 5 Sold 17,100 shares of the $8 par common stock for $10 per share. January 12 Sold 2,200 shares of the 7 percent preferred stock for $110 per share. April 5 Sold 22,800 shares of the $8 par common stock for $12 per share. December 31 During the year, earned $318,300 in cash revenue and paid $240,100 for cash operating expenses. December 31 Declared the cash dividend on the outstanding shares of preferred stock for Year 1. The dividend will be paid on February 15 to stockholders of record on January 10, Year 2. December 31 Closed the revenue, expense, and dividend accounts to the retained earnings account. Year 2 February 15 Paid the cash dividend declared on December 31, Year 1. March 3 Sold 3,300 shares of the $100 par preferred stock for $120 per share. May 5 Purchased 500 shares of the common stock as treasury stock at $16 per share. December 31 During the year, earned $249,100 in cash revenues and paid $172,100 for cash operating expenses. December 31 Declared the annual dividend on the preferred stock and a $0.75 per share dividend on the common stock. December 31 Closed revenue, expense, and dividend accounts to the retained earnings account. a. Prepare journal entries for these transactions for Year 1 and Year 2 and post them to T-accounts. b. Prepare the balance sheets at December 31, Year 1 and Year 2. c-1. What is the number of common shares outstanding at the end of Year 1? At the end of Year 2? How many common shares had been issued at the end of Year 1? At the end of Year 2? c-2. Is there a difference between issued and outstanding common shares for Year 1? For Year 2?

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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Sun Corporation received a charter that authorized the issuance of 114,000 shares of $8 par common stock and 22,000 shares of $100 par, 7 percent cumulative preferred stock. Sun Corporation completed the following transactions during its first two years of operation.

Year 1

January 5	Sold 17,100 shares of the $8 par common stock for $10 per share.
January 12	Sold 2,200 shares of the 7 percent preferred stock for $110 per share.
April 5	Sold 22,800 shares of the $8 par common stock for $12 per share.
December 31	During the year, earned $318,300 in cash revenue and paid $240,100 for cash operating expenses.
December 31	Declared the cash dividend on the outstanding shares of preferred stock for Year 1. The dividend will be paid on February 15 to stockholders of record on January 10, Year 2.
December 31	Closed the revenue, expense, and dividend accounts to the retained earnings account.

Year 2

February 15	Paid the cash dividend declared on December 31, Year 1.
March 3	Sold 3,300 shares of the $100 par preferred stock for $120 per share.
May 5	Purchased 500 shares of the common stock as treasury stock at $16 per share.
December 31	During the year, earned $249,100 in cash revenues and paid $172,100 for cash operating expenses.
December 31	Declared the annual dividend on the preferred stock and a $0.75 per share dividend on the common stock.
December 31	Closed revenue, expense, and dividend accounts to the retained earnings account.

a. Prepare journal entries for these transactions for Year 1 and Year 2 and post them to T-accounts.

b. Prepare the balance sheets at December 31, Year 1 and Year 2.

c-1. What is the number of common shares outstanding at the end of Year 1? At the end of Year 2? How many common shares had been issued at the end of Year 1? At the end of Year 2?
c-2. Is there a difference between issued and outstanding common shares for Year 1? For Year 2?

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