Question

Tom Yuppy, a wealthy investor, paid $20,000 for 1,000 shares of $10 par common stock issued to him by Leuig Corp. A month later, Leuig Corp. issued an additional 2,000 shares of stock to Yuppy for $25 per share.
Required:
Show the effect of the two stock issues on Leuig's books in a horizontal statements model.

Answer 1

Answer:

See the attached excel file for the horizontal statements model.

Explanation:

In the attached excel file, we have:

FA = Financing activity

For event 1:

Cash = $20,000

Common stock = Number of shares * Share price at par = 1,000 * $10 = $10,000

PIC in Excess = Paid in capital in excess = Cash - Common stock = $20,000 - $10,000 = $10,000

For event 2:

Cash = Number of shares issued * Price per share = 2,000 * $2.50 = $50,000

Common stock = Number of shares * Share price at par = 2,000 * $10 = $20,000

PIC in Excess = Cash - Common stock = $50,000 - $20,000 = $30,000

Download xlsx