Fundamentals of Financial Accounting 4th Edition by Fred Phillips,Robert Libby,Patricia Libby

Exercise 50

Analyzing Accounting Equation Effects, Recording Journal Entries, and Preparing a Partial Balance Sheet Involving Stock Issuance, Purchase, and Reissuance Transactions
Worldwide Company obtained a charter from the state in January 2013, which authorized 200,000 shares of common stock, $10 par value. During the first year, the company earned $38,200 and the following selected transactions occurred in the order given:
a. Issued 60,000 shares of the common stock at $ 12 cash per share.
b. Reacquired 2,000 shares at $15 cash per share from stockholders.
c. Reissued 1,000 of the shares of the treasury stock purchased in transaction (b) two months later at $18 cash per share.
Required:
1. Indicate the effects of each transaction on the accounting equation.
2. Prepare journal entries to record each transaction.
3. Prepare the stockholders' equity section of the balance sheet at December 31, 2013.
TIP : Because this is the first year of operations, Retained Earnings has a zero balance at the beginning of the year.