Deaton Co. completed the following transactions in 2011, the first year of operation:
1. Issued 20,000 shares of no-par common stock for \(\$ 10\) per share.
2. Issued 5,000 shares of \(\$ 20\) par, 6 percent, preferred stock for \(\$ 20\) per share.
3. Paid a cash dividend of \(\$ 6,000\) to preferred shareholders.
4. Issued a 10 percent stock dividend on no-par common stock. The market value at the dividend declaration date was \(\$ 15\) per share.
5. Later that year, issued a 2 -for-1 split on the shares of outstanding common stock. The market price of the stock at that time was \(\$ 35\) per share.
6. Produced \(\$ 145,000\) of cash revenues and incurred \(\$ 97,000\) of cash operating expenses.
7. Closed the revenue, expense, and dividend accounts to retained earnings.
Required

a. Record each of these events in a horizontal statements model like the following one. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or financing activity (FA). Use NA to indicate that an element is not affected by the event.

b. Record the 2011 transactions in general journal form and post them to T-accounts.

c. Prepare the stockholders' equity section of the balance sheet at the end of 2011. (Include all necessary information.)

d. Theoretically, what is the market value of the common stock after the stock split?

Transcribed Image Text:

Assets = Equity + Ret. Earn. P. Stk. C. Stk. Rev. - Exp. = Net Inc. Cash Flow