Chen Corp. completed the following transactions in 2007, the first year of operation:

1. Issued 20,000 shares of \($20\) par common stock for \($30\) per share.

2. Issued 5,000 shares of \($50\) par, 5 percent, preferred stock at \($51\) per share.

3. Paid the annual cash dividend to preferred shareholders.

4. Issued a 5 percent stock dividend on the common stock. The market value at the dividend declaration date was \($40\) per share.

5. Later that year, issued a 2-for-l split on the 21,000 shares of outstanding common stock.

6. Earned \($210,000\) of cash revenues and paid \($140,000\) 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. Prepare the stockholders’ equity section of the balance sheet at the end of 2007.

Transcribed Image Text:

Assets Liab. + Equity PIC in PIC in Pfd. Stk. Com. Stk. + Excess PS + Excess CS + Ret. Earn. Rev. Exp. = Net Inc. Cash Flow