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

Exercise 18

Reporting Stockholders' Equity and Determining Dividend Policy
Incentive Corporation was organized in 2012 to operate a financial consulting business. The charter authorized the following capital stock: common stock, par value $4 per share, 12,000 shares. During the first year, the following selected transactions were completed:
a. Issued 6,000 shares of common stock for cash at $20 per share.
b. Issued 2,000 shares of common stock for cash at $23 per share.
Required:
1. Show the effects of each transaction on the accounting equation.
2. Give the journal entry required for each of these transactions.
3. Prepare the stockholders' equity section as it should be reported on the 2012 year-end balance sheet. At year-end, the accounts reflected a profit of $100.
4. Incentive Corporation has $30,000 in the company's bank account. Should the company declare cash dividends at this time Explain.