Question

Tarrant Corporation was organized this year to operate a financial consulting business. The charter authorized the following stock: common stock, $19 par value, 12,900 shares authorized. During the year, the following selected transactions were completed: a. Sold 7,000 shares of common stock for cash at $38 per share. b. Sold 2,600 shares of common stock for cash at $43 per share. c. At year-end, the accounts reflected income of $7,200. No dividends were declared.

Answer 1

Solution :

                                      Tarrant Corporations

First of all let us prepare the Journal Entries

1. Cash     (7000 x 38)                                     266,000

  Common stock (7000 x 19)                                                       133,000

  Paid in capital in excess of stated value

  common stock   (7000 x 19)                                                      133,000

2. Cash   (2600 x 43)                                      111,800

   common stock  (2600 x 19)                                                       49400

   Paid in capital in excess of stated value

     Common stock (2600 x 24)                                                    62400

3. Income summary                                        7000

    Retained earing                                                                         7000

                        Tarrant corporation

Balance sheet - shareholder's section

Share holder's equity

Contributed capital

$ 19 par, issued and outstanding 9600 shares   =  182400

Paid in capital in excess of par                                 196800

Total contributed capital                                            379200

Retained earnings                                                          7200

Total shareholder's equity                                          372,000