 Hello in this lecture. We're gonna work some test type problems smaller type problems that could fit into the format of multiple choice questions We have here a corporation issued 250 shares of its $5 power value common stock and payment of a 3300 charge from its accountant for assistance in filing its charter with the state The entry to record this transaction will be what so in this case We're gonna kind of have to interpret what's going on here. What happened is it looks like we had an accountant do some Transaction for us and then send us an invoice the invoice being for 3300 instead of paying cash for that invoice 3300 check we are gonna issue stock. We decided on 250 shares at $5 par. What does that mean to us? It means that the 250 shares We're assuming has a market value of 3300 because we're us we're going to exchange for that value So the bill was for that much if we're assuming that we're gonna pay 250 in shares then the 250 shares must be equal to the 3300 price now you might be saying well Where does the $5 par value work into that then remember that the $5 par value does not represent the market value of the stock It's just an arbitrary number so that we have a standard set number for all shares of stock when we see it on the financial statement So let's see what this would look like if we got a bill from the accountant would might be going to accounting expense or legal and professional Expense some kind of expense account It's gonna go in here. That's gonna be the debit for 3300 that's the bill we got then we're gonna issue the common stock I'm just gonna say common stock is gonna be issued now. We issue it at just the standard par value So we're gonna say I'm gonna make it a negative to make the credits negative. It's gonna be the 250 Times 5 that's what we're gonna issue now Of course the debits do not equal the credits here because once again that 250 times 5 just an arbitrary number that we're gonna Issue the stocks for and we got to put the difference into an account called additional paid-in capital I'm not gonna type it all out, but it's additional paid-in capital and so we're gonna say that's gonna be the plug 3003 minus the 1002 50 means we have an excess of additional paid-in capital of 2050 I'm gonna do that with the negative sum function mean I'm gonna say negative instead of equals summing this up this number Minus this number this number plus that negative number and then flip the sign that's why we put a negative in front of it and That means that this minus this minus this equals zero or the credits here equal the debits there And that's what we have so remember when we issue the stock We're gonna issue it at the par value and then put the difference in the additional paid-in capital So really the the common stock and the additional paid-in capital is the investment That has been input next one says that prior to May 1st company has never had any treasury stock transaction a company purchased 280 shares of its common stock on May 1st So we purchased our own stock. That's treasury stock for 14,000 on July 1st. It reissued 140 of these shares for fifty two dollars per share on August 1st It reissued the remaining treasury stock at 49 per share What is the balance in the paid-in capital treasury stock account at August 2nd? Okay, so what first when we first pump bought it back It's gonna be treasury stock that we that we purchased back and even though it's in the equity section It's kind of like another asset We treat it almost as if we purchased another company meaning we're gonna put it on there as a debit but not in the asset second in the equity section and we paid 14,000 for it and We're gonna credit cash just like if we purchased someone else's stock now What we have to do is track that we got to say okay Well, what does it cost per share then if we purchased our own stock back at that time? We're gonna we're gonna say that the number of shares for treasury stock shares is going to be we purchased 280 shares for a total cost. I'm gonna put this over here a total cost of 14,000 therefore the cost per share Is going to be the different the dividing those 14,000 divided by 280 would then be the cost we paid per share So we're gonna kind of figure that out. It's gonna be the 14,000 divided by the 280 That means it costs $50 per share So just like when we sell any other type of share we're gonna have to figure out, okay Well, if we sell it we're gonna sell it for whatever the market price is could be greater or less than this $50 per share We generally put the difference into this Treasury stock the sorry the paid in capital for the Treasury stock So that's what we need to track now So the first thing that happens or the next thing that happens on July 1st We reissued 140 so we reissued resold our Treasury stock, which we purchased and now we're putting it back on the markets We're gonna get cash for that sale. We sold it for 52 Even though we bought it for 50 so we kind of have like a gain But since it's on our own stock, it's all gonna be in the equity section We're not gonna put a game to it. So we're gonna say this equals the cash is going to be 140 times $52 per share We got 7,280 and then we're gonna credit the Treasury stock to take that off the books But we're gonna take it off the books at the $50 because that's the cost that we bought it for So we're gonna say this is I'm gonna say it's a negative just to make it a negative 50 times 140 shares that we sold and that comes up to 7,000 and of course 7,000 minus the 7 2,80 means That we need 280 on the credit to make our debits equal the credits So I'm gonna say this is the negative sum of These which means this plus that negative which is a subtraction problem flip the sign so that our credits Equal to 7,280 which equals the debits now if this was a normal stock sale We would put that into a gain meaning we got more cash than we purchased it for but since it's Treasury stock It's all in the equity section. This is what it's going to be. We're gonna call this paid-in-capital Treasury Account, so I'm just gonna copy and paste that here. That's gonna be the credit And that's what we're kind of trying to track. So I'll paste that here too. That's gonna be It's not what I want to do Just want to paste it normal and we'll make our t account here like this as well So I'm just gonna Make a t account and say that we're going to underline this And put the t here And Where's my left? All right And so we have this in here at this point the 280 And then of course we have another activity that happens. We sold the rest of the Treasury stock on August 1st It reissued the remaining 49 per share. What is the bounce from the paid-in Treasury stock at the at august 2nd? So the next one we said cash Now we've got another 140 shares we sold but now we sold it for $49 Even though we purchased it for 50 so times 49 And then we're gonna take the the Treasury stock off the books for That 140 times 50 Because that's what we bought it for and then again We're gonna have this account paid in capital Which is going to be the plug in this case. It's got to be a debit though And I know I have my debits and credits not in perfect order But we're gonna do it this way because it's quick. So now my debits equal the credits 7000 7000 And obviously and and if it was someone else's stock that would be a loss In this case again, it's going to go into that paid-in capital. So now we have a debit in the paid-in capital Credits are still winning. So the balance in the paid-in capital at this point Would equal the debits minus the credits credits are winning by the by the 1040 so that's what we have there We can go ahead and do our double underline bang here And that's what we have in the paid-in capital treasury stock Next one says that a company paid 60 cents in cash dividends per share Its earnings per share is four dollars and 32 cents and its market price is 28 dollars and 50 cents So its cash dividend yield is what so when we talk about that the dividend yield We're trying to what we're comparing it's going to be a ratio many of these kind of Estimations of value are going to be ratios. We're going to compare the amount of dividends. We got compared to the market price So we're going to say the dividends paid. We got the dividends dividends Our 0.6 and i'm going to go ahead and add decimals to all of these because we're going to need to see some decimals Some pennies here. So we got 0.6 and we're not talking about the earnings per share in this case We're talking about the amount that we actually got paid in dividends the earnings We can't take that out because as a stockholder we can't take out the earnings So we could still do calculations on the earnings per share But what we're talking about in this particular calculation is the actually cold cash that we actually got received from the company in the form of Dividends so we got the 0.6 and then we got the market price Market price being 28.5 and if we divide those out I'm going to underline home tab font on your line And then we're going to say it's the 0.6 60 cents divided by the 28 50 and that gives us 0.02 We're going to make that a percent. So we're going to go to the home tab Numbers percentize it and then add a couple decimals. So it's 2.11 percent That would be the dividend yield