Incentive Corporation was organized in 2009 to operate a financial consulting business. The charter authorized the following capital stock: common stock, par value $4 per share, 12,000 shares. During the first year, the following selected transactions were completed:


a. Issued 6,000 shares of common stock for cash at $20 per share.
b. Issued 2,000 shares of common stock for cash at $23 per share.
Requirement 1:
Show the effects of each transaction on the accounting equation. (Indicate the account, amount, and direction of the effect on the accounting equation (+ for increase, – for decrease and NE for no effect).)


Assets = Liabilities + Stockholders' Equity
a. (Click to select)No effectRetained earningsCashAdditional paid-in capitalCommon stock (Click to select)-46,000+46,000NE-120,000+120,000 (Click to select)Retained earningsNo effectCommon stockAdditional paid-in capitalCash (Click to select)+24,000-24,000+96,000-96,000NE (Click to select)Common stockRetained earningsIncrease in Preferred stockCashRetained earningsNo effect (Click to select)NE+24,000-96,000-24,000+96,000
(Click to select)CashRetained earningsNo effectAdditional paid-in capitalIncrease in Preferred stock (Click to select)+96,000NE+24,000-24,000-96,000
b. (Click to select)Additional paid-in capitalNo effectCommon stockRetained earningsCash (Click to select)+120,000+46,000NE-46,000-120,000 (Click to select)No effectCommon stockRetained earningsAdditional paid-in capitalCash (Click to select)+96,000-96,000-24,000+24,000NE (Click to select)Increase in Preferred stockCashCommon stockRetained earningsNo effect (Click to select)-8,000+8,000-38,000+38,000NE
(Click to select)CashAdditional paid-in capitalIncrease in Preferred stockRetained earningsNo effect (Click to select)NE+38,000+8,000-8,000-38,000

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Requirement 2:
Give the journal entry required for each of these transactions. (Omit the "$" sign in your response.)

Event General Journal Debit Credit
a. (Click to select)CashInterest expenseAdditional paid-in capitalAccounts receivableRetained earningsSalaries expenseCommon stockAccounts payable
(Click to select)Rent expenseAccounts payableInterest expenseCashCommon stockSalaries expenseNotes payableAdditional paid-in capital
(Click to select)Notes payableCommon stockAccounts payableCashInterest expenseSalaries expenseAdditional paid-in capitalRent expense

b. (Click to select)Note payableRetained earningsCashAccounts payableSalaries expenseCommon stockAdditional paid-in capitalInterest expense
(Click to select)Additional paid-in capitalCashSales revenueAccounts payableSalaries expenseInterest expenseCommon stockNotes payable
(Click to select)Common stockNotes payableAdditional paid-in capitalSalaries expenseAccounts payableCashInterest expenseSales revenue

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Requirement 3:
Prepare the stockholders' equity section as it should be reported on the 2009 year-end balance sheet. At year-end, the accounts reflected a profit of $100. (Omit the "$" sign in your response.)


Stockholders' Equity
Contributed capital:
Common stock $
Additional paid-in capital

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Total contributed capital
Retained earnings

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Stockholders' equity $

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Requirement 4:
Incentive Corporation has $30,000 in the company's bank account. Should the company declare cash dividends at this time?


(Click to select)NoYes

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