Answer:
Incentive Corporation
A. Assets = Liabilities + Stockholders’ Equity
a. Assets (Cash +$129,600 )= Liabilities + Stockholders' Equity (Common stock +$5,400 and Additional Paid-in Capital $1124,200)
b. Assets (Cash +$37,800 )= Liabilities + Stockholders' Equity (Common stock +$1,400 and Additional Paid-in Capital $36,400)
B. Journal Entries:
Debit Cash $129,600
Credit Common stock $5,400
Credit APIC $124,200
To record the issuance of 5,400 shares of common stock for cash at $24.
Debit Cash $37,800
Credit Common stock $1,400
Credit APIC $36,400
To record the issuance of 1,400 shares of common stock for cash at $27.
C. Journal Entries:
1. Debit Cash $107,100
Credit Common stock $10,200
Credit APIC $96,900
To record the issuance of 5,100 common stock shares with $2 par value for $21 per share.
2. Debit Cash $26,400
Credit Common Stock $2,200
Credit APIC $24,200
To record the issuance of 1,100 common stock shares with $2 par value for $24 per share.
3. Stockholders' Equity
INCENTIVE CORPORATION
Balance Sheet (Partial)
At December 31
Stockholders’ Equity
Contributed Capital:
Common Stock $6,200
Additional Paid-in Capital 121,100
Total Contributed Capital $127,300
Net income 200
Total Stockholders’ Equity $127,500
4. The maximum amount of cash dividends that Incentive Corporation can declare and distribute is $200, despite having $49,000 in the bank account.
Explanation:
a) Data and Calculations:
Authorized shares, 12,000 of common stock at $1 par value
Net income at year-end = $200
Cash balance at bank = $49,000
Transactions:
Cash $129,600 Common stock $5,400 APIC $124,200
Cash $37,800 Common stock $1,400 APIC $36,400
b) Transactions:
1. Cash $107,100 Common stock $10,200 APIC $96,900
2. Cash $26,400 Common Stock $2,200 APIC $24,200
