Question

Homestead Oil Corp. was incorporated on January 1, 2016, and issued the following stock for cash:...

Homestead Oil Corp. was incorporated on January 1, 2016, and issued the following stock for cash:

700,000 shares of no-par common stock were authorized; 150,000 shares were issued on January 1, 2016, at $18.00 per share.

250,000 shares of $110 par value, 8.00% cumulative, preferred stock were authorized, and 71,000 shares were issued on January 1, 2016, at $140 per share.

Net income for the years ended December 31, 2016 and 2017, was $1,450,000 and $2,490,000, respectively.

No dividends were declared or paid during 2016. However, on December 28, 2017, the board of directors of Homestead declared dividends of $1,600,000, payable on February 12, 2018, to holders of record as of January 19, 2018.

1.Use the horizontal model for the issuance of common stock and preferred stock on January 1, 2016. (Use amounts with + for increases and amounts with – for decreases.)

2. Use the horizontal model for the declaration of dividends on December 28, 2017. (Use amounts with + for increases and amounts with – for decreases.)

3. Use the horizontal model for the payment of dividends on February 12, 2018. (Use amounts with + for increases and amounts with – for decreases.)

Balance Sheet Income Statement
Assets = Liabilities + Stockholders’ Equity ← Net Income = Revenues − Expenses
= + ← = −
Business   Accounting   
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Answer #1
1
Balance sheet Income Statement
Assets = Liabilities + Stockholders Equity <- Net Income = Revenues - Expenses
Cash   + $ 12640000 Common Stock (150000*18) + $ 2700000
Preferred Stock (71000*110) + $ 7810000
Additional Pain in Capital (71000*30) + $ 2130000
2
Balance sheet Income Statement
Assets = Liabilities + Stockholders Equity <- Net Income = Revenues - Expenses
Dividends Payable + $ 1600000 Retained Earnings -$ 1600000
3
Balance sheet Income Statement
Assets = Liabilities + Stockholders Equity <- Net Income = Revenues - Expenses
Cash   - $ 1600000 Dividends Payable - $ 1600000
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