University Of Phoenix Financial Accounting Tools For Busines

University Of Phoenix Financial Accounting Tools For Busin

2132018 University Of Phoenix Financial Accounting Tools For Busin

Prepare the journal entries for the Sagan Co. transactions. Journalize preferred stock transactions and indicate statement presentation. The stockholders' equity section of Lachlin Corporation's balance sheet at December 31 is provided, and questions regarding outstanding shares, stated value, par value, dividend calculations, and retained earnings are to be answered. Additionally, prepare correct entries for capital stock transactions based on the given transactions of Mesa Corporation.

Sample Paper For Above instruction

The purpose of this paper is to demonstrate understanding and application of accounting principles related to journalizing stock transactions, presenting stockholders' equity, and analyzing corporate financial statements. This analysis encompasses journal entries for stock issuance, classification of stockholders' equity, and calculations pertinent to dividends and retained earnings, all grounded in standard accounting practices and relevant financial reporting standards.

Journal Entries for Sagan Co. Transactions

Since the specific transactions of Sagan Co. are not detailed in the assignment prompt, a generic approach is discussed. Typically, when recording stock issuance, the entries involve debiting cash and crediting common or preferred stock accounts depending on the stock issued. For example, if Sagan Co. issued 10,000 shares of preferred stock at $20 per share with a par value of $10, the journal entry would be:

Debit Cash: 200,000


Credit Preferred Stock (par value): 100,000


Credit Additional Paid-in Capital – Preferred Stock: 100,000

This illustrates recording the cash received, the par value of stock issued, and the excess over par as additional paid-in capital.

Following similar patterns, each transaction involving stock issuance, purchase, or dividend payments can be journalized accordingly, aligning with authoritative accounting standards (FASB, 2020).

Journalizing Preferred Stock Transactions for Penland Corporation

Penland Corporation's transactions of issuing preferred stock at different times can be journalized as follows:

  1. February 1: Issued 40,000 shares at $51 per share.

  2. Debit Cash: 2,040,000

    Credit Preferred Stock (par value of $50): 2,000,000

    Credit Additional Paid-in Capital – Preferred Stock: 40,000

  3. July 1: Issued 60,000 shares at $56 per share.

  4. Debit Cash: 3,360,000

    Credit Preferred Stock: 3,000,000

    Credit Additional Paid-in Capital – Preferred Stock: 360,000

These entries reflect the receipt of cash from stock issuance above par value, with the excess allocated to additional paid-in capital, as per accounting standards (FASB, 2020).

Presentation of Preferred Stock in Financial Statements

In the statement of stockholders' equity, preferred stock is typically shown as a separate line item under equity, with disclosures of shares authorized, issued, and outstanding. The preferred stock account balance is presented with details on dividends payable if any. The additional paid-in capital related to preferred stock is also disclosed, helping users understand the company's capital structure (Schroeder et al., 2019).

Analysis of Lachlin Corporation’s Stockholders' Equity

Given the stockholders' equity section on the balance sheet, questions are answered as follows:

  • Outstanding Shares: Subtract treasury stock (if any) from issued shares listed in the section.
  • Stated Value of Common Stock: If stated value is provided, multiply the number of outstanding shares by stated value.
  • Par Value of Preferred Stock: Usually indicated in the stock description; if not, can be inferred from stock's total value divided by shares issued.
  • Dividend Rate on Preferred Stock: Calculated as annual dividend divided by par value; e.g., $36,000 / total preferred stock value.
  • Retained Earnings with Dividends in Arrears: The balance reported for retained earnings would be net of dividends in arrears if considered significant; otherwise, the net retained earnings balance remains unchanged.

Correct Entries for Mesa Corporation’s Capital Stock Transactions

The accountant's initial entries are reviewed, and appropriate corrections are made based on standard practices:

  1. If the entries for issuance of stock were incorrectly recorded, entries should be adjusted to debit Cash and credit Preferred Stock or Common Stock accounts at par value, with excess credited to Additional Paid-in Capital.
  2. If dividend payments or stock repurchases were recorded improperly, correct entries involve debiting dividends payable or treasury stock accounts and crediting cash, aligned with the transaction specifics.

Accurate recording ensures the financial statements reflect true ownership and capital contributions, complying with GAAP principles.

Conclusion

Proper journalizing and statement presentation of stock transactions is vital for transparent financial reporting. Accurate calculations related to dividends, shares outstanding, and stockholder's equity components provide stakeholders with meaningful insights into the company's financial health. Adherence to accounting standards and meticulous record-keeping facilitate compliance and foster investor trust.

References

  • Financial Accounting Standards Board (FASB). (2020). Accounting Standards Codification (ASC) 505: Equity.
  • Schroeder, R. G., Clark, M. W., & Cathey, J. M. (2019). Financial Accounting Theory and Analysis: Text and Cases. Wiley.
  • Hogan, C., & Wilson, R. (2017). Accounting Principles and Policies. McGraw-Hill Education.
  • Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2018). Financial Accounting. Wiley.
  • Wahlen, J. M., Baginski, S. P., & Bradshaw, M. (2020). Financial Reporting, Financial Statement Analysis, and Valuation. Cengage Learning.
  • Gibson, C. H. (2018). Financial Reporting & Analysis. South-Western College Pub.
  • Wild, J. J., Subramanyam, K. R., & Halsey, R. F. (2019). Financial Statement Analysis. McGraw-Hill Education.
  • Epstein, L., & Jermakowicz, E. (2016). IFRS Standards and the Impacts on Financial Reporting. Wiley.
  • Kieso, D. E., Weygandt, J. J., & Warfield, T. D. (2019). Intermediate Accounting. Wiley.
  • Gray, S. J., & Salter, S. B. (2015). Accounting for Corporate Finance. Routledge.

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