Question

Exercise 10-7B Prepare the stockholders' equity section (LO10-7) A company has two classes of stock authorized: 7%, $10 par preferred, and $1 par value common. The following transactions affect stockholders' equity during Year 1 its first year of operations: January 2 Issues 100.000 shares of common stock for $33 per share. February 6 Issues 2,800 shares of 7% preferred stock for 513 per share. September 10 Purchases 12,000 shares of its own common stock for $38 per share. December 15 Resells 6,000 shares of treasury stock at $43 per share. In its first year of operations, the company has net income of $158,000 and pays dividends at the end of the year of $94.000 ($1 per share) on all common shares outstanding and $1,960 on all preferred shares outstanding Required: Prepare the stockholders' equity section of the balance sheet for the company as of December 31, Year 1. (Amounts to be deducted should be indicated by a minus sign.) Balance Sheet (Stockholders' Equity Section) December 31, Year 1 Stockholders' equity: Total paid in capital Total stockholders' equity

Answer 1

Ans: Balance sheet (Stockholder' Equity Section) December 31, yearl Particulars Amount Stockholders' equity Common Stock $94.000 (94000 shares @ 1 per share) Add: Preferred Stock $28,000|(2800 shares @ $10 per preferred share) Add: Common stock $3,230,000 (100,000*(33-1)+6000*(43-38)) Add: Preferred Stock $8,400 (2800*3) Total Paid in capital $3,360,400 Add: Retained earnings $62.040|(158000-94000-1960) Subtotal $3.422.4401 Less Treasury Stock -$174,000 (6000*29) Total stockholders' equity $3,248,440