The stockholders’ equity section of Sweet Inc. at the beginning of the current year appears below. Common stock, $10 par value, authorized 999,000 shares, 310,000 shares issued and outstanding $3,100,000 Paid-in capital in excess of par—common stock 565,000 Retained earnings 533,000 During the current year, the following transactions occurred. 1. The company issued to the stockholders 95,000 rights. Ten rights are needed to buy one share of stock at $33. The rights were void after 30 days. The market price of the stock at this time was $35 per share. 2. The company sold to the public a $218,000, 10% bond issue at 104. The company also issued with each $100 bond one detachable stock purchase warrant, which provided for the purchase of common stock at $31 per share. Shortly after issuance, similar bonds without warrants were selling at 96 and the warrants at $8. 3. All but 4,750 of the rights issued in (1) were exercised in 30 days. 4. At the end of the year, 80% of the warrants in (2) had been exercised, and the remaining were outstanding and in good standing. 5. During the current year, the company granted stock options for 9,500 shares of common stock to company executives. The company, using a fair value option-pricing model, determines that each option is worth $10. The option price is $31. The options were to expire at year-end and were considered compensation for the current year. 6. All but 950 shares related to the stock-option plan were exercised by year-end. The expiration resulted because one of the executives failed to fulfill an obligation related to the employment contract.

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

See similar textbooks

Related questions

Concept explainers

Question

100%

The stockholders’ equity section of Sweet Inc. at the beginning of the current year appears below.

Common stock, $10 par value, authorized 999,000 shares, 310,000 shares issued and outstanding		$3,100,000
Paid-in capital in excess of par—common stock		565,000
Retained earnings		533,000

During the current year, the following transactions occurred.

1.		The company issued to the stockholders 95,000 rights. Ten rights are needed to buy one share of stock at $33. The rights were void after 30 days. The market price of the stock at this time was $35 per share.
2.		The company sold to the public a $218,000, 10% bond issue at 104. The company also issued with each $100 bond one detachable stock purchase warrant, which provided for the purchase of common stock at $31 per share. Shortly after issuance, similar bonds without warrants were selling at 96 and the warrants at $8.
3.		All but 4,750 of the rights issued in (1) were exercised in 30 days.
4.		At the end of the year, 80% of the warrants in (2) had been exercised, and the remaining were outstanding and in good standing.
5.		During the current year, the company granted stock options for 9,500 shares of common stock to company executives. The company, using a fair value option-pricing model, determines that each option is worth $10. The option price is $31. The options were to expire at year-end and were considered compensation for the current year.
6.		All but 950 shares related to the stock-option plan were exercised by year-end. The expiration resulted because one of the executives failed to fulfill an obligation related to the employment contract.

**Article Title: Understanding the Preparation of General Journal Entries**

Prepare general journal entries for the current year to record the transactions listed above. **Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts. Round intermediate calculations to 7 decimal places (e.g., 1.2468754) and final answers to 0 decimal places (e.g., 5,125).**

**Table of Transactions and Journal Entries**

| No. | Account Titles and Explanation | Debit | Credit |
|-----|------------------------------------------------------------------|---------|---------|
| 1. | No Entry | 0 | 0 |
| 2. | Cash | 226720 | |
| | Discount on Bonds Payable | | |
| | Bonds Payable | | |
| | Paid-in Capital-Stock Warrants | | |
| 3. | Cash | | |
| | Common Stock | | |
| | Paid-in Capital in Excess of Par - Common Stock | | |
| 4. | Paid-in Capital-Stock Warrants | | |
| | Cash | | |
| | Common Stock | | |
| | Paid-in Capital in Excess of Par - Common Stock | | |
| 5. | Compensation Expense | | |
| | Paid-in Capital-Stock Options | | |
| 6. | **For options exercised:** | |
| | Cash | | |
| | Paid-in Capital-Stock Options | | |
| | Common Stock | | |
| | Paid-in Capital in Excess of Par - Common Stock | | |
| | **For options lapsed:** | |
| | Paid-in Capital-Stock Options | | |
| | Compensation Expense | | |

The table above is used to prepare and record general journal entries related to corporate financial transactions within the accounting period. Here is a step-by-step approach to understanding and completing the table for journal entries:

1. **Transaction Identification

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions