Chapter 13: 10RQ (page 707)
What is treasury stock? What type of account is Treasury Stock, and what is the account’s normal balance?
Treasury Stock refers to previously outstanding stock repurchased from stockholders by the issuing company. It is a contra equity account with a normal debit balance.
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Preparing a corporate income statement
ABC Corporation’s accounting records include the following items, listed in no particular order, at December 31, 2018:
Other Income and (Expenses) \( (7,200) Cost of Goods Sold \) 30,000
Net Sales 81,000 Operating Expenses 25,000
Gain on Discontinued Operations 3,600
The income tax rate for ABC Corporation is 39%.
Prepare ABC’s income statement for the year ended December 31, 2018. Omit earnings per share. Use the multi-step format.
How does preferred stock differ from common stock?
Journalizing issuance of stock
Steller Systems completed the following stock issuance transactions:
May 19 Issued 1,700 shares of \(3 par value common stock for cash of \)10.50 per share.
Jun. 3 Issued 300 shares of \(9, no-par preferred stock for \)15,000 cash.
11 Received equipment with a market value of \(68,000 in exchange for 5,000 shares of the \)3 par value common stock.
Requirements
1. Journalize the transactions. Explanations are not required.
London Corporation has two classes of stock: Common, \(1 par value; and Preferred, \)4 par value. Journalize the issuance of 10,000 shares of common stock for $8 per share.
Journalizing issuance of stock and preparing the stockholders’ equity section of the balance sheet
The charter for ASAP-TV, Inc. authorizes the company to issue 100,000 shares of \(5, no-par preferred stock and 500,000 shares of common stock with \)1 par value. During its start-up phase, ASAP-TV completed the following transactions:
Sep. 6 Issued 550 shares of common stock to the promoters who organized the corporation, receiving cash of \(16,500.
12 Issued 400 shares of preferred stock for cash of \)23,000.
14 Issued 1,500 shares of common stock in exchange for land with a market value of \(17,000.
Requirements
1. Record the transactions in the general journal.
2. Prepare the stockholders’ equity section of the ASAP-TV balance sheet atSeptember 30, 2018, assuming ASAP-TV, Inc. had net income of \)38,000 for the month.
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