Reference no: EM13839933

Problem 1: Stock transactions for corporate expansion

Vaga Optics produces medical lasers for use in hospitals. The accounts and their balances appear in the ledger of Vaga Optics on December 31 of the current year as follows:

Preferred 2% Stock, $120 par (50,000 shares authorized, 25,000 shares issued)	$ 3,000,000
Paid-In Capital in Excess of Par-Preferred Stock	400,000
Common Stock, $75 par (500,000 shares authorized, 300,000 shares issued)	22,500,000
of	540,000
Paid-In Capital in Excess      Par-Common Stock
Retained Earnings	55,000,000

At the annual stockholders' meeting on January 31, the board of directors presented a plan for modernizing and expanding plant operations at a cost of approximately $9,500,000. The plan provided (a) that the corporation borrow $4,500,000, (b) that 20,000 shares of the unissued preferred stock be issued through an underwriter, and (c) that a building, valued at $1,200,000, and the land on which it is located, valued at $900,000, be acquired in accordance with pre¬liminary negotiations by the issuance of 27,400 shares of common stock.

The plan was approved by the stockholders and accomplished by the following transactions:

Mar. 8. Borrowed $4,500,000 from Conrad National Bank, giving a 6% mortgage note.

13. Issued 20,000 shares of preferred stock, receiving $130 per share in cash.

26. Issued 27,400 shares of common stock in exchange for land and a build-ing, according to the plan.

No other transactions occurred during March.

Instructions

Illustrate the effects on the accounts and financial statements of each of the preceding transactions.

Problem 2:

Disposal of fixed asset

Equipment acquired on January 8, 2009, at a cost of $375,000, has an estimated useful life of 12 years and an estimated residual value of $45,000.

a.) What was the annual amount of depreciation for the years 2009, 2010, and 2011, using straight-line method of depreciation?

b.) What was the book value of the equipment on January 1, 2012?

c.) Assuming that the equipment was sold on January 7, 2012, for $280,000, illustrate the effects on the accounts and financial statements of the sale.

d.) Assuming that the equipment was sold on January 7, 2012, for $300,000 instead of $280,000, illustrate the effects on the accounts and financial statements of the sale.

Attachment:- Assignment.rar