Problem 1
Sweet Sixteen has two classes of stock authorized: $100 par preferred and $1 par value common. As of the beginning of 2012, 1,000 shares of preferred stock have been issued and 20,000 shares of common stock have been issued. The following transactions affect stockholdersâ equity during 2012:
March 1 Issue 3,000 additional shares of common stock for $22 per share.
April 1 Issue 5,000 additional shares of preferred stock for $110 per share.
June 1 Declare a cash dividend on common stock of $1 per share and a cash dividend on preferred stock of $5 per share to all stockholders of record on June 15.
June 30 Pay the cash dividends declared on June 1.
August 1 Repurchase 2,000 shares of common treasury stock for $18 per share.
October 1 Reissue 1,000 shares of treasury stock purchased on August 1 for $20 per share.
Sweet Sixteen has the following beginning balances in its stockholdersâ equity accounts on January 1, 2012: preferred stock, $100,000, common stock, $20,000; paid-in capital, $380,000; and retained earnings, $450,000. Net income for the year ended December 31, 2012, is $65,000.
Required:
1. Record each of these transactions.
2. Indicate whether each of these transactions would increase (+), decrease (â), or have no effect (NE) on total assets, total liabilities, and total stockholdersâ equity by completing the following chart.
Transaction
Total
Assets
Total Liabilities
Total
Stockholdersâ
Equity
Issue common stock
Issue preferred stock
Declare cash dividends
Pay cash dividends
Repurchase treasury stock
Reissue treasury stock
3. Prepare the stockholdersâ equity section of the balance sheet as of December 31, 2012.
4. Prepare the statement of stockholdersâ equity for the year ended December 31, 2012.
5. Explain how items 3 and 4 are similar and how they are different.
Problem 1
Sweet Sixteen has two classes of stock authorized: $100 par preferred and $1 par value common. As of the beginning of 2012, 1,000 shares of preferred stock have been issued and 20,000 shares of common stock have been issued. The following transactions affect stockholdersâ equity during 2012:
March 1 Issue 3,000 additional shares of common stock for $22 per share.
April 1 Issue 5,000 additional shares of preferred stock for $110 per share.
June 1 Declare a cash dividend on common stock of $1 per share and a cash dividend on preferred stock of $5 per share to all stockholders of record on June 15.
June 30 Pay the cash dividends declared on June 1.
August 1 Repurchase 2,000 shares of common treasury stock for $18 per share.
October 1 Reissue 1,000 shares of treasury stock purchased on August 1 for $20 per share.
Sweet Sixteen has the following beginning balances in its stockholdersâ equity accounts on January 1, 2012: preferred stock, $100,000, common stock, $20,000; paid-in capital, $380,000; and retained earnings, $450,000. Net income for the year ended December 31, 2012, is $65,000.
Required:
1. Record each of these transactions.
2. Indicate whether each of these transactions would increase (+), decrease (â), or have no effect (NE) on total assets, total liabilities, and total stockholdersâ equity by completing the following chart.
| Transaction | Total Assets | Total Liabilities | Total Stockholdersâ Equity |
| Issue common stock | |||
| Issue preferred stock | |||
| Declare cash dividends | |||
| Pay cash dividends | |||
| Repurchase treasury stock | |||
| Reissue treasury stock |
3. Prepare the stockholdersâ equity section of the balance sheet as of December 31, 2012.
4. Prepare the statement of stockholdersâ equity for the year ended December 31, 2012.
5. Explain how items 3 and 4 are similar and how they are different.
