Tarrant Corporation was organized in 2011 to operate a financial consulting business. The charter authorized the following

Question:

Tarrant Corporation was organized in 2011 to operate a financial consulting business. The charter authorized the following capital stock: common stock, par value $10 per share, 11,500 shares. During the first year, the following selected transactions were completed:

a. Sold and issued 5,600 shares of common stock for cash at $20 per share.

b. Sold and issued 1,000 shares of common stock for cash at $25 per share.

c. At year-end, the accounts reflected a $6,000 loss. Because a loss was incurred, no income tax expense was recorded.

Required:

1. Give the journal entry required for each of these transactions.

2. Prepare the stockholders’ equity section as it should be reported on the year-end balance sheet.

3. Can the company pay dividends at this time? Explain.

Common Stock
Common stock is an equity component that represents the worth of stock owned by the shareholders of the company. The common stock represents the par value of the shares outstanding at a balance sheet date. Public companies can trade their stocks on... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...