Answered: Worldwide Company obtained a charter…

College Accounting, Chapters 1-27 (New in Accounting from Heintz and Parry)

22nd Edition

ISBN:9781305666160

Author:James A. Heintz, Robert W. Parry

Publisher:James A. Heintz, Robert W. Parry

Chapter20: Corporations: Organization And Capital Stock

Section: Chapter Questions

Problem 1MP: Stockholders equity accounts and other related accounts of Gonzales Company as of January 1, 20--,...

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Question

Worldwide Company obtained a charter from the state in January that authorized 200,000 shares of
common stock, $10 par value. During the first year, the company earned $38,200 and the following
selected transactions occurred in the order given:
a. Issued 60,000 shares of the common stock at $12 cash per share.
b. Reacquired 2,000 shares at $15 cash per share from stockholders; the shares are now held in
treasury.
c. Reissued 1,000 of the shares in transaction ( b) two months later at $18 cash per share.
Required:
1. Indicate the effects of each transaction on the accounting equation.
2. Prepare journal entries to record each transaction.
3. Prepare the stockholders’ equity section of the balance sheet at December 31.
TIP: Because this is the first year of operations, Retained Earnings has a zero balance at the
beginning of the year.

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