Common stock—issuance and dividend transactions Altuve Co. was incorporated on January 1, 2016, at which time 250,000 shares of $1 par value common stock were authorized, and 140,000 of these shares were issued for $12 per share. Net income for the year ended December 31, 2016, was $1,200,000. Altuve Co.’s board of directors declared dividends of $2 per share of common stock on December 31, 2016, payable on February 7, 2017.Required:Use the horizontal model (or write the entry) to show the effects ofThe issuance of common stock on January 1, 2016.The declaration of dividends on December 31, 2016.The payment of dividends on February 7, 2017.

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Asked Jul 18, 2019
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Common stock—issuance and dividend transactions Altuve Co. was incorporated on January 1, 2016, at which time 250,000 shares of $1 par value common stock were authorized, and 140,000 of these shares were issued for $12 per share. Net income for the year ended December 31, 2016, was $1,200,000. Altuve Co.’s board of directors declared dividends of $2 per share of common stock on December 31, 2016, payable on February 7, 2017.
Required:
Use the horizontal model (or write the entry) to show the effects of
The issuance of common stock on January 1, 2016.
The declaration of dividends on December 31, 2016.
The payment of dividends on February 7, 2017.

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Expert Answer

Step 1

Dividends: This is the amount of cash distributed to stockholders by a company out its earnings, according to their proportion of shares invested in the company.

Step 2

Prepare journal entries to record the issuance of common stock as on January 1, 2016:

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Post Credit Debit (S) Accounts Title and Explanation Date (S) Ref. January Cash (140,000x$12) 1, 2016 1,680,000 Common stock 140,000 Additional paid up capital (140,000x$11 (To record the issuance of 1,540,000 соmmon stock)

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Step 3

The horizontal effect for the issuance...

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Assets Liabili ties Stockholders' equity Cash $1,680,000 = Liabilities +Common stock $140,000 Additional capital $1,540,000

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