Problem - Effects of Stockholders' Equity Transactions on Balance Sheet
The following transactions occurred at Horton Inc. during its first year of operation:
a. Issued 100,000 shares of common stock at $ 5 each; 1,000,000 shares are authorized at $ 1 par value.
b. Issued 10,000 shares of common stock for a building and land. The building was appraised for $ 20,000, but the value of the land is undeterminable. The stock is selling for $ 10 on the open market.
c. Purchased 1,000 shares of its own common stock on the open market for $ 16 per share.
d. Declared a dividend of $ 0.10 per share on outstanding common stock. The dividend is to be paid after the end of the first year of operations. Market value of the stock is $ 26.
e. Declared a 2- for- 1 stock split. The market value of the stock was $ 37 before the stock split.
f. Reported $ 180,000 of income for the year.
Please answer the following question - Identify and analyze the effect of each transaction. Prepare the Stockholders' Equity section of the balance sheet. Write a paragraph that explains the number of shares of stock issued and outstanding at the end of the year.