Infrequent Transactions The following transactions were recorded on the books of the Baxter Company during the current year. The company: 1. Issued a “small” common stock dividend of 400 shares. The par value is $10 per share and the relevant market price was $20 per share. 2. Exchanged equipment with a cost of $10,000 and a book value of $3,800 for land valued at $12,000, paying an additional $8,500 in cash. 3. Converted preferred stock ($100 par) with a total par value of $20,000 and a book value of $22,800 to 1,500 shares of its $10 par common stock. The book value method was used to account for the conversion. 4. Recorded a loss of $4,200 as a result of retiring bonds payable with a face value of $30,000 and a related premium of $5,000 by paying $39,200. 5. Recorded an extraordinary gain (net of income taxes) of $6,000 as a result of a tornado that destroyed a building costing $100,000 and having an associated book value of $70,000. The insurance proceeds (net of income taxes) totaled $76,000. 6. Acquired equipment by entering into a capital lease. The lease required payments of $5,000 in advance; the present value of the lease payments (before the initial payment) was $34,000. Required For each of the preceding items, discuss if and illustrate how the transaction would be recorded on the worksheet to support the statement of cash flows. Use a journal entry format for your illustrations.
Infrequent Transactions The following transactions were recorded on the books of the Baxter Company during the current year. The company:
1. Issued a “small” common stock dividend of 400 shares. The par value is $10 per share and the relevant market price was $20 per share.
2. Exchanged equipment with a cost of $10,000 and a book value of $3,800 for land valued at $12,000, paying an additional $8,500 in cash.
3. Converted preferred stock ($100 par) with a total par value of $20,000 and a book value of $22,800 to 1,500 shares of its $10 par common stock. The book value method was used to account for the conversion.
4. Recorded a loss of $4,200 as a result of retiring bonds payable with a face value of $30,000 and a related premium of $5,000 by paying $39,200.
5. Recorded an extraordinary gain (net of income taxes) of $6,000 as a result of a tornado that destroyed a building costing $100,000 and having an associated book value of $70,000. The insurance proceeds (net of income taxes) totaled $76,000.
6. Acquired equipment by entering into a capital lease. The lease required payments of $5,000 in advance; the present value of the lease payments (before the initial payment) was $34,000.
Required
For each of the preceding items, discuss if and illustrate how the transaction would be recorded on the worksheet to support the statement of cash flows. Use a journal entry format for your illustrations.
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