# Horton Co. was organized on January 2, 2014, with 500,000 authorized shares of \$10 par value common stock. During 2014, Horton had the following capital transactions: January 5-issued 375,000 shares at \$14 per share. July 27-purchased 25,000 shares at \$11 per share. November 25-sold 18,000 shares of treasury stock at \$13 per share. Horton used the cost method to record the purchase of the treasury shares. What would be the balance in the Paid-in Capital from Treasury Stock account at December 31, 2014?

The balance in the Paid-in Capital from Treasury Stock account at December 31, 2014 is \$36,000

Explanation:

The computation of the balance in the treasury stock account is shown below:

= Number of shares sold × (Selling price of share - purchase price of share)

= 18,000 shares × (\$13 per share - \$11 per share)

= 18,000 shares × \$2 per share

= \$36,000

The other items which are mentioned like issued shares, authorized shares are irrelevant because we have to compute for the treasury stock, not for the common stock. So, these parts would be ignored in the computation part.

## Related Questions

Sebastian received a raise this year so his income climbed from \$45,000 to \$52,000. Last year Sebastian purchased 2 sunglasses. This year he has purchased 7 sunglasses. Assuming that all of the other things remain constant, what type of a good are sunglasses and what type of income elasticity of demand does Sebastian have

normal good

elastic demand

Explanation:

Income elasticity of demand measures the responsiveness of quantity demanded to changes in income.

Income elasticity = percentage change in quantity demanded / percentage change in income

percentage change in quantity demanded = (7/2) - 1 = 250%

percentage change in income = (52,000 / 45,000) - 1 = 15.6%

250 / 15.6 =  16.07

If the absolute value of income elasticity of demand is greater than one, it means demand is elastic.

Normal goods are goods that are goods whose demand increases when income increases and falls when income falls

Inferior goods are goods whose demand falls when income rises and increases when income falls.

Carla Vista Company reports the following operating results for the month of August: sales \$385,000 (units 5,500), variable costs \$250,000, and fixed costs \$94,000. Management is considering the following independent courses of action to increase net income. 1. Increase selling price by 10% with no change in total variable costs or units sold. 2. Reduce variable costs to 56% of sales. Compute the net income to be earned under each alternative. 1. Net Income \$ 2. Net Income \$ Which course of action will produce the higher net income

The computation is shown below:

1.

Selling Price = Sales ÷  Units Sold

Current Selling Price = \$385,000 ÷  5500

= \$70

Now

Expected Selling Price per unit = \$70 + (\$70× 10%)

= \$77

Now

Expected Sales = 5500 × \$77

= \$423,500

Now

Net Income = Sales - Variable Cost - Fixed Cost

= \$423,500 - \$250,000 - \$94,000

2.

Sales = \$385000

Variable cost = \$385,000 × 56% = \$215,600

Sales                     \$385,000

Less: variable cost -\$215,600

Contribution Margin \$169,400

Les: fixed cost          -\$94,000

Net Income               \$75,400

As we can see that if there is an increase in Selling Price by 10% so it would produce highest Net Income.

Comparing two scenarios for Carla Vista Company: one of increasing the selling price by 10%, and the other of reducing the variable costs to 56% of sales, the former scenario of increasing the selling price provides a higher net income and is the better strategy.

The question asks us to calculate the net income under two different scenarios for Carla Vista Company, and then determine which option produces the higher net income.

To do this, we first need to understand the company's current situation.

Its current net income is calculated as follows: Sales (\$385,000) - Variable Costs (\$250,000) - Fixed Costs (\$94,000) = \$41,000.

Under the first alternative, management plans to increase the selling price by 10% without any changes in total variable costs or units sold.

So the new sales figure will be \$385,000 + 10% of \$385,000 = \$423,500.

The net income then becomes: New Sales (\$423,500) - Variable Costs (\$250,000) - Fixed Costs (\$94,000) = \$79,500.

Under the second alternative, management plans to reduce variable costs to 56% of sales.

So, the new variable costs will be 56% of \$385,000 = \$215,600.

The net income then becomes: Sales (\$385,000) - New Variable Costs (\$215,600) - Fixed Costs (\$94,000) = \$75,400.

Comparing the two alternatives, we see that the first alternative, increasing the selling price by 10%, gives a higher net income and should thus be the advisable course of action.

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Rachel's Designs has 1,700 shares of 5%, \$50 par value cumulative preferred stock issued at the beginning of 2019. All remaining shares are common stock. Due to cash flow difficulties, the company was not able to pay dividends in 2019 or 2020. The company plans to pay total dividends of \$14,000 in 2021. How much of the \$14,000 dividend will be paid to preferred stockholders and how much will be paid to common stockholders

\$12,750 and \$1,250

Explanation:

The computation of the dividend paid is shown below:

For 2021, the preference dividend is

= 1700 shares × \$50 × 5%

= \$4,250

Since in 2019 and 2020 the dividend is not paid

So, For 2019 and for 2020, the preference dividend is

= \$4,250 × 2 years

= \$8,500

So total preference dividend is

= \$4,250 + \$8,500

= \$12,750

And, the total dividend paid is \$14,000

So, for the common stockholder, it is

= \$14,000 - \$12,750

= \$1,250

Problem 1-11 For most products, higher prices result in a decreased demand, whereas lower prices result in an increased demand. Let d = annual demand for a product in units p = price per unit Assume that a firm accepts the following price-demand relationship as being realistic: d = 800 - 10p where p must be between \$20 and \$70. How many units can the firm sell at the \$20 per-unit price? Round your answer to the nearest whole number.

The firm will sell 600 units at \$20

Explanation:

Giving the following information:

d = annual demand for a product in units

p = price per unit

d = 800 - 10p

p must be between \$20 and \$70.

Elastic demand

We have to calculate how many units the firm will sell at \$20

d=800-10*p=800-10*20= 600 units

Explanation:

The firm can sell 800 - (10 * 20) = 600 units at the \$20 per-unit price.

The firm can sell 800 - (10 * 70) = 50 units at the \$70 per-unit price.

Exercise 8-14 Bank reconciliation LO P3 Wright Company's cash account shows a \$30,500 debit balance and its bank statement shows \$28,800 on deposit at the close of business on May 31. The May 31 bank statement lists \$250 in bank service charges; the company has not yet recorded the cost of these services. Outstanding checks as of May 31 total \$7,100. May 31 cash receipts of \$7,700 were placed in the bank’s night depository after banking hours and were not recorded on the May 31 bank statement. In reviewing the bank statement, a \$550 check written by Smith Company was mistakenly drawn against Wright’s account. The bank statement shows a \$300 NSF check from a customer; the company has not yet recorded this NSF check. Prepare its bank reconciliation using the above information.

Bank Reconciliation Statement

Balance at Bank as per updated cash book            \$29,950

Less Bank Lodgements not yet credited                   (\$7,700)

Balance as per Bank Statement                                \$29,350

Explanation:

The first step is to update the Cash Book Bank Balance as follows :

Debit :

Balance as at May 31 (un-adjusted)                           \$30,500

Totals                                                                           \$30,500

Credit:

Service Charges                                                              \$250

Dishonored Cheque                                                        \$300

Updated Cash Book Balance (balancing figure)     \$29,950

Totals                                                                          \$30,500

The next step is to prepare a Bank Reconciliation Statement

Bank Reconciliation Statement

Balance at Bank as per updated cash book            \$29,950

Less Bank Lodgements not yet credited                   (\$7,700)

Balance as per Bank Statement                                \$29,350

The Bank Statement has an error and must be reported :

After the Error is Reported, the Bank Statement will show a Balance of \$29,350.

Balance as at May                                                                  \$28,800

Add Back Check Mistakenly drawn against Wright’s account \$550

Balance as per Bank Statement                                            \$29,350

During 2018, Colorado Company stock was sold for \$9,400. The fair value of the stock on December 31, 2018, was Clemson Corp. stock—\$19,100; Buffaloes Co. stock—\$20,500. None of the equity investments result in significant influence. (a) Prepare the adjusting journal entry needed on December 31, 2017. (b) Prepare the journal entry to record the sale of the Colorado Co. stock during 2018. (c) Prepare the adjusting journal entry needed on December 31, 2018.

Explanation:

The journal entries are as follows

a. Unrealized Holding Gain or Loss Dr \$1,310

(Being the unrealized gain or loss is recorded)

2. Cash \$9,410

Loss on Sale of Investment  \$490     (\$9,900 - \$9,410)

To Equity Investment  \$9,900

(Being the sale of the stock is recorded)

To  Unrealized Holding Gain or Loss  \$1,020

(Being the fair value adjustment is recorded)

The computation is shown below:

Stock                              Cost                  Fair Value      Unrealized Gain(Loss)

Clemson Corp. Stock    \$20,200           \$19,410          -\$790

Buffaloes Co. stock       \$20,200           \$20,700         \$500

Net unrealized gain (loss)                                            -\$290

2017                                                                                -\$1,310