A Company Is Authorized to Issue 750,000 Shares of $2

question 60

Essay

A company is authorized to issue 750,000 shares of $2 par value common stock.Prepare journal entries to record the following selected transactions that occurred during the company's first year of operations:
$$\begin{array} { |l |l| } \hline \text { Jan. } 10 & \text { Sold } 102,000 \text { shares of common stock for } \$ 8 \text { cash per share. } \\\hline 15 & \text { Exchanged } 10,000 \text { shares of common stock for equipment with a market } \\&\text { value of } \$ 70,000\\\hline & \text { Exchanged } 500 \text { shares of common stock for } \$ 3,000 \text { of legal services incurred } \\\text { Feb. } 1&\text { during the company's organization. }\\\hline\end{array}$$

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Definitions:

Dividend Payment Claims

Rights of shareholders to receive a portion of a company's earnings distributed as dividends.

Dividend Growth Model

A model for valuing a stock by assuming constant, usually non-zero growth in dividends per share.

Capital Gains Yield

The increase in the price of an investment, calculated as the percentage difference between the current price and the purchase price.