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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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BuyFindarrow_forward

Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Comprehensive The shareholders’ equity section of Superior Corporation’s balance sheet as of December 31, 2018, is as follows:

Chapter 15, Problem 10P, Comprehensive The shareholders equity section of Superior Corporations balance sheet as of December , example  1

The following events occurred during 2019:

Chapter 15, Problem 10P, Comprehensive The shareholders equity section of Superior Corporations balance sheet as of December , example  2

Required:

  1. 1. Prepare journal entries for each of the above transactions.
  2. 2. Calculate the number of authorized, issued, and outstanding common shares as of December 31, 2019.
  3. 3. Calculate Superior's legal capital at December 31, 2019.

1.

To determine

Prepare the journal entries for the given transactions.

Explanation

Journal: Journal is the method of recording monetary business transactions in chronological order. It records the debit and credit aspects of each transaction to abide by the double-entry system.

Rules of Debit and Credit: Following rules are followed for debiting and crediting different accounts while they occur in business transactions:

  • Debit, all increase in assets, expenses and dividends, all decrease in liabilities, revenues and stockholders’ equities.
  • Credit, all increase in liabilities, revenues, and stockholders’ equities, all decrease in assets, expenses.

Common stock: These are the ordinary shares that a corporation issues to the investors in order to raise funds. In return, the investors receive a share of profit from the profits earned by the corporation in the form of dividend.

Preferred stock: The stock that provides a fixed amount of return (dividend) to its stockholder before paying dividends to common stockholders is referred as preferred stock.

Prepare the journal entries for the given transactions:

DateAccount Titles and ExplanationPost Ref.Debit ($)Credit ($)
2019    
January 5Cash ($8×10,000) 80,000 
     Common Stock ($5×10,000)  50,000
     Additional Paid-in Capital on Common Stock   30,000
 (To record issuance of common stock)   
     
January 5Cash ($109×10,000) 1,090,000 
     Preferred Stock ($100×10,000)

2.

To determine

Calculate the number of common shares authorized, issued, and outstanding as December 31, 2019.

3.

To determine

Calculate Corporation S’s legal capital as on December 31, 2019.

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