Incentive Corporation was organized in 2009 to operate a financial consulting business. The charter authorized the following capital stock: common stock, par value $4 per share. 12,000 shares. During the first year, the following selected transactions were completed:
a - Issued 6,000 shares of common stock for cash at $20 per share.
b - Issued 2,000 shares of common stock for cash at $23 per share.
Required:
1 - show the effects of each transaction on the accounting equation.
2 - Give the journal entry required for each of these transactions.
3 - Prepare the stickholders' equity section as it should be reported on the 2009 year-end balance sheet. At year-end, the accounts reflected a profit of $100.
4 - Incentive Corporation has $30,000 in the company's bank account. Should the company declare cash dividends at this time? Explain.
I AM LOST. Can someone please instruct me on how to go about solving this question?
1) Both assets and SE go up as cash goes to the company and more shares are bought.
2)
Cash $120,000
Stocks issued on par $24,000
Gain on c/s $96,000
, how much manufacturing overhead was allocated to production? Archangel Manufacturing has just finished the year 2012. They created a predetermined manufacturing overhead allocation rate at the beginning of the year based on a percentage of direct labor costs. Below are various data:
Total manufacturing overhead estimated at the beginning of the year: $140,000
Total direct labor costs estimated at the beginning of the year: $350,000
Total direct labor hours estimated at the beginning of the year: 12,000 direct labor hours
Actual manufacturing overhead costs for the year: $159,000
Actual direct labor costs for the year: $362,000
Actual direct labor hours for the year: 12,400 direct labor hours
To solve this question, you need to understand the basic accounting concepts and principles related to stock issuances, journal entries, and stakeholder's equity. Here's a step-by-step approach to help you solve this problem:
1. Begin by understanding the given information:
- Incentive Corporation was organized with authorized capital stock of 12,000 shares of common stock, par value $4 per share.
- In the first year, two transactions occurred: 6,000 shares were issued at $20 per share, and 2,000 shares were issued at $23 per share.
2. Effects on the accounting equation:
- Each transaction will have an impact on the accounting equation, which is Assets = Liabilities + Equity. Specifically, the effects will be seen in the equity section.
3. Determine the effects of each transaction on the accounting equation:
a. Issued 6,000 shares of common stock for cash at $20 per share:
- The company received cash, increasing the assets.
- The company issued additional shares, increasing the equity.
b. Issued 2,000 shares of common stock for cash at $23 per share:
- The company received cash, increasing the assets.
- The company issued additional shares, increasing the equity.
4. Journal entries:
a. Issued 6,000 shares of common stock for cash at $20 per share:
- The journal entry will be:
- Debit: Cash (increasing the asset account)
- Credit: Common Stock (increasing the equity account)
b. Issued 2,000 shares of common stock for cash at $23 per share:
- The journal entry will be:
- Debit: Cash (increasing the asset account)
- Credit: Common Stock (increasing the equity account)
5. Prepare the shareholders' equity section for the 2009 year-end balance sheet:
- Start with the common stock account and add the issued shares from the two transactions above.
- Calculate the total value of common stock (number of shares issued × par value).
- Add retained earnings, which reflects the company's profit.
- Finally, calculate the total shareholders' equity by adding the common stock and retained earnings.
6. Determine whether the company should declare cash dividends:
- To answer this question, you need to have additional information, such as the company's dividend policy, financial condition, and potential future cash needs.
- Based on the given information, there is no specific indication of the company's dividend policy or financial position.
- However, you can analyze the company's current bank balance of $30,000 to assess its ability to pay dividends. Consider factors like ongoing operational expenses, upcoming investments, and cash flow projections.
- If the company has sufficient funds to cover its obligations without jeopardizing future operations, it may choose to declare cash dividends.
Remember, this step-by-step approach can guide you through solving the given question. However, it's always advisable to consult relevant accounting principles, the specific organization's policies, or consult an expert for a comprehensive understanding and accurate solutions.