Question

Altuve Co. was incorporated on January 1, 2013, at which time 250,000 shares of $10 par value common stock were authorized, and 110,000 of these shares were issued for $17 per share. Net income for the year ended December 31, 2013, was $1,257,300. Altuve Co.’s board of directors declared dividends of $3 per share of common stock on December 31, 2013, payable on February 7, 2014.Use the horizontal model to show the effects of the following:a. The issuance of common stock on January 1, 2013b. The declaration of dividends on December 31, 2013.c. The payment of dividends on February 7, 2014.

Answer 1

Altuve Co.

Horizontal Model and Transaction Effects:

Balance Sheet

a. The issuance of common stock on January 1, 2013

Assets = Liabilities + Equity

Cash $1,870,000 = Common Stock $1,100,000

Additional Paid-in 770,000

b. The declaration of dividends on December 31, 2013.

Assets = Liabilities + Equity

Assets = Liabilities $330,000 + Equity ($330,000)

c. The payment of dividends on February 7, 2014.

Assets ($330,000) = Liabilities ($330,000) + Equity

Step-by-step explanation:

a) Data and Analysis:

a. The issuance of common stock on January 1, 2013

Jan. 1, 2013: Cash $1,870,000 Common Stock $1,100,000 Additional Paid-in Capital $770,000

b. The declaration of dividends on December 31, 2013.

Dec. 31, 2013: Cash Dividend $330,000 Dividends Payable $330,000

c. The payment of dividends on February 7, 2014.

Feb. 7, 2014: Dividends Payable $330,000 Cash $330,000