Answer:
Great Adventures
1. Journal Entries for 2022 Transactions:
Nov 5:
Debit Cash Account with $1,000,000
Credit Common Stock with $100,000
Credit Additional Paid-in Capital with $900,000
To record issue of additional 100,000 shares for $10 per share.
Nov. 16:
Debit Treasury Stock with $10,000
Debit Additional Paid-in Capital with $140,000
Credit Cash Account with $150,000
To record repurchase of 10,000 treasury stock for $15 per share.
Nov. 24:
Debit Cash Account with $64,000
Credit Additional Paid-in Capital with $60,000
Credit Treasury Stock with $4,000
To record resale of 4,000 shares of treasury stock at $16 per share.
Dec. 1:
Debit Dividend with $11,400
Credit Dividends Payable with $11,400
To record declaration of cash dividend of $0.10 per share.
Dec. 15:
No Journal entries required
Dec. 20:
Debit Dividend Payable with $11,400
Credit Cash Account with $11,400
To record the payment of dividend.
Dec 31:
Debit Buildings Account with $800,000
Credit Cash Account with $800,000
To record payment for construction of new cabins and other facilities.
2. Stockholders' Equity section of the Balance Sheet as at Dec. 31, 2022:
Common Stock = $114,000 ((20,000 + 100,000 - 10,000 + 4,000) x $1))
Less Treasury Stock = $6,000 ((10,000 - 4,000) x $1)
Add Additional Paid-in Capital = $820,000 ($900,000 - 140,000 + 60,000)
Retained Earnings = $57,885 ($33,450 + 35,835 - 11,400)
Total Equity = $985,885
Explanation:
1. Journal entries are used to show the accounts to be debited and the accounts to be credited in the general ledger.
2. The Common Stock is recorded at par value. The above-par value is recorded in Additional Paid-in Capital in accordance with US GAAP.
3. Treasury Stock represents repurchase of own stock. It is a contra account to the Common Stock. The number of shares outstanding is the sum of shares of common stock less the shares of treasury stock. The par value method was used to recognize Treasury Stock. This method recognizes the par value in the Treasury Stock while the above par value is reported in Additional Paid-in Capital account. The other method for recognizing Treasury Stock is the cost method. With this method, both the par value and above par value are recognized in the Treasury Stock account.
4. The retained earnings ending balance is the addition of the beginning balance and net income, while dividend payment is deducted.
