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

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