Question

After establishing their company's fiscal year-end to be October 31, Natalie and Curtis begin operating Cookie & Coffee Creations Inc. on November 1, 2020. On that date, after the issuance of shares, the paid-in capital section of the company's balance sheet is as follows. Paid-in capital Preferred stock, $0.50 noncumulative, no par value, 10,000 shares authorized, 2,000 issued Common stock, no par value, 100,000 shares authorized, 25,930 issued $10,000 25,930 Cookie & Coffee Creations then has the following selected transactions during its first year of operations. Dec. 1 Issues an additional 800 preferred shares to Natalie's brother for $4,000. Apr. 30 Declares a semiannual dividend to the preferred stockholders of record on May 15, payable on June 1. June 30 Repurchases 750 shares of common stock issued to the lawyer, for $500. Recall that these were originally issued for $750. The lawyer had decided to retire and wanted to liquidate all of her assets. Oct. 31 The company has had a very successful first year of operations. It earned revenues of $462,500 and incurred operating expenses of $370,000 (including $750 legal fee, but excluding income tax). 31 Records income tax expense. (The company has a 20% income tax rate.) 31 Declares a semiannual dividend to the preferred stockholders of record on November 15, payable on December 1.

Answer 1

COOKIE AND COFFEE CREATIONS INC.
Statement of Retained Earnings
October 31, 2021.
Balance on November 1, 2020	$0
Add: Net Income	$74,000
	$74,000
Less: Dividends ($700 + $700)	($1,400)
Balance on October 31, 2021	$72,600
COOKIE AND COFFEE CREATIONS INC.
Partial Balance Sheet
October 31, 2021.
Stockholders' Equity
Paid-in Capital:
Preferred Stock ($10,000 + $4,000)	$14,000
Common Stock	$25,930
Total Paid-in Capital	$39,930
Less: Treasury Stock	($500)
Total Outstanding Capital Stock	$39,430
Add: Retained Earnings	$72,600
Total Shareholders' Equity	$112,030