Sheffield Company has two classes of capital stock outstanding:
7%, $100 par preferred and $2 par common. At December 31, 2017, the
following accounts were included in stockholders’ equity.
Preferred Stock, 50,000 shares$ 5,000,000
Common stock, 1,200,000 shares2,400,000
Paid-in Capital in Excess of Par – Preferred Stock300,000
Paid-in Capital in Excess of Par – Common Stock28,800,000
Retained Earnings12,800,000
The following transactions affected stockholders’ equity during
2018.
Jan. 1-500 shares of preferred stock issued at $ 108 per share.
Mar. 21-110,000 shares of common stock issued at $ 40 per share.
June 1-2-for-1 common stock split (par value reduced to $1).
July 15-77,000 shares of common treasury stock purchased at $ 32 per share. Sheffield uses the cost method.
Sept. 4-9,000 shares of treasury stock reissued at $ 38 per share.
Dec. 31-The preferred dividend is declared, and a common dividend of 68¢ per share is declared.
Dec. 31-Net income is $ 4,587,000.
Prepare the stockholders’ equity section for Hatch Company at
December 31, 2018.
SHEFFIELD COMPANY
Stockholders’ Equity
December 31, 2018
Solution:
Sheffield Company | ||
Partial Balance Sheet | ||
As at December 31, 2018 | ||
Particulars | Amount | |
Stockholders Equity: | ||
Capital Stock: | ||
Preferred Stock [$5,000,000+ (500*$100)] | $50,50,000.00 | |
Common Stock [$2,400,000+ (110,000*$2)] | $26,20,000.00 | |
Total Capital stock | $76,70,000.00 | |
Additional paid in Capital: | ||
Paid-in capital in excess of par- Preferred Stock [$300,000+(500*$8)] | $3,04,000.00 | |
Paid-in capital in excess of Stated value- common stock [28,800,000+(110,000*$38)] | $3,29,80,000.00 | |
Paid-in capital from treasury stock [9000*($38 -$32)] | $54,000.00 | |
$3,33,38,000.00 | ||
Total Paid in capital before retained earnings | $4,10,08,000.00 | |
Add: Retained earnings (Note) | $1,52,98,140.00 | |
Total Paid in Capital and Retained Earnings | $5,63,06,140.00 | |
Less: Treasury Stock [(77000-9000)*$32] | $21,76,000.00 | |
Total Stockholder's Equity | $5,41,30,140.00 |
Note:
Number of Common shares for dividend = (1,200,000+ 110,000)*2 - (77000-9000) = 1,310,000*2 - 68,000
= 2,620,000 - 68000 = 2,552,000
Retained Earnings = Beginning balance + Net Income - Preferred Dividend - Common stock dividend
= $12,800,000 + $4,587,000 - ($5,050,000*7%) - (2,552,000*0.68)
= $12,800,000 + $4,587,000- $353,500 - $1,735,360
= $15,298,140
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