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Tom Yuppy, a wealthy investor, paid $20,000 for 1,000 shares of $10 par common stock issued to him by Leuig Corp. A month later, Leuig Corp. issued an additional 2,000 shares of stock to Yuppy for $25 per share.

Required:
Show the effect of the two stock issues on Leuig's books in a horizontal statements model.

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Answer:

See the attached excel file for the horizontal statements model.

Explanation:

In the attached excel file, we have:

FA = Financing activity

For event 1:

Cash = $20,000

Common stock = Number of shares * Share price at par = 1,000 * $10 = $10,000

PIC in Excess = Paid in capital in excess = Cash - Common stock = $20,000 - $10,000 = $10,000

For event 2:

Cash = Number of shares issued * Price per share = 2,000 * $2.50 = $50,000

Common stock = Number of shares * Share price at par = 2,000 * $10 = $20,000

PIC in Excess = Cash - Common stock = $50,000 - $20,000 = $30,000

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Following are calcultion to the given question:

                                   [tex]\bold{ \text{ TOM YUPPY CO. }}\\\\\ \ \ \ \ \ \ \ \ \ \ \text{ Horizontal Statements Model }\\\\ \text{ Event \ \ \ \ \ \ \ \ \ \ \ \ \ Balance sheet \ \ \ \ \ \ \ \ \ \ \ \ \ Income Statement}[/tex][tex]\text{ Assets=Stockholders' Equity Revenue-Expense=Net Income Statement of Cash Flow}[/tex]

    [tex]Cash+Land=Common Stock+PIC in Excess[/tex]

For point 1:[tex]Common Stock \ \ \ \ \ \ \ 20000 \ \ \ \ + \ \ \ \ \ \ 0 \ \ \ \ \ \ \ 10000\ \ \ \ \ \ \ \ + \ \ \ \ \ \ \ \ \ 10000\ \ \ \ \ \ \ \ 0 \ \ \ \ \ \ \ \ \ \ \ \ \ \ 0\ \ \ \ \ \ \ \ \ \ 0 \ \ \ \ \ \ \ \ 20000\ \ \ \ \ \ \ \ \ \ FA[/tex]

For point 2: [tex]\text{ Issue of additional shares} \ \ \ \ \ \ \ \ \ 50000\ \ \ \ \ \ \ \ \ \ + \ \ \ \ 0 \ \ \ \ \ \ \ \ \ \ 20000\ \ \ \ \ \ \ \ \ + \ \ \ \ \ \ \ \ 30000 \ \ \ \ \ \ \ 0 \ \ \ \ \ \ \ 0 \ \ \ \ \ \ \ \ \ 0\ \ \ \ \ \ \ \ \ 20000\ \ \ \ \ \ \ FA[/tex]

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