Below Are Two Transactions for Navaho Co

question 198

Essay

Below are two transactions for Navaho Co.

1. On June 1, Navaho Co. issued 2,000 shares of $5 par common stock for $16 per share.

2. On June 15, Navaho Co. issued 1,200 shares of $5 par preferred stock to acquire a building. The stock is not widely traded, and the current market value of the stock is not evident. The building has recently been appraised by an independent firm as having a market value of $15,000.

Required
For each of these transactions, determine the impact on the accounting equation of the journal entry that Navaho Co. would make.

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Definitions:

Current Ratio

A liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year, calculated as current assets divided by current liabilities.

Current Liabilities

Obligations or debts a company must pay within a year or within its operating cycle if longer than a year.

Company Finance

Refers to the financial activities related to running a company, focusing on maximizing shareholder value through long-term and short-term financial planning and the implementation of various strategies.

Horizontal Analysis

An analytical technique in financial statement analysis where an item or line is compared over multiple periods to identify trends or patterns.