Answer:
Verrecchia Company
Financial Statement effects:
1. Jan. 5 Issued 10,000 shares of common stock for $12 cash per share:
Assets (Cash) would increase by $120,000
Equity (Common Stock) would increase by $120,000
2. Jan. 18 Repurchased 4,000 shares of common stock at $15 cash per share.
Assets (Cash) would decrease by $60,000
Equity (Common Stock) would decrease by $60,000
3. Mar. 12 Sold one-fourth of the treasury shares acquired January 18 for $18 cash per share.
Assets (Cash) would increase by $18,000
Equity (Common Stock) would increase by $18,000
4. July 17 Sold 500 shares of the remaining treasury stock for $13 cash per share.
Assets (Cash) would increase by $6,500
Equity (Common Stock) would increase by $6,500
5. Oct. 1 Issued 5,000 shares of 8%, $25 par value preferred stock for $35 cash per share.
Assets (Cash) would increase by $175,000
Equity (Preferred Stock) would increase by $125,000
Equity (Additional Paid-in Capital - Preferred) would increase by $50,000
Explanation:
The Financial Statement effects of each transaction is a reflection of how each transaction affects at least two opposite elements of the financial statement. Every transaction affects the elements of the financial statement in one way or another, which enables the accounting equation to remain in balance.
For example, a transaction may increase the assets and also increase either the liabilities or equity side of the balance sheet.
In our example, the transactions affected only the balance sheet. This means that each transaction increases or decreases the assets, liabilities, or equity sections.
