Question

2. On January 1, 2010, the accounts of Mac Corporation showed the following: Common stock, par SI, authorized 100.000 shares Capital in excess of par value ($2 per share) Retained carnings 60,000 140,000 During 2010, the following transactions occurred affecting stockholders' equity (in the order given) A B. C. D. Issued a 100° stock dividend when the market price was at $5 per share. Purchased treasury stock, 1.000 shares at a total cost of $8.000. Declared and paid cash dividends. SI5.000. Net income for 2010. S25.000 Required: The stockholders' equity section of the balance sheet for the company must be prepared for the December 31, 2010 balance sheet. It is given below with certain amounts missing. Supply the missing amounts by entering them in the blanks. STOCKHOLDERS' EQUITY (1) Common stock, par SI authorized shares 100.000 shares issued Capital in excess of par value Total contributed capital Retained earnings Treasury stock, shares Total stockholders' equity

Answer 1

Working:

Number of shares issued and outstanding at beginning =Capital in excess of par value / per share value

                               = 60000 /2

                               = 30000 shares

Par value of shares at beginning of year= 30000*1 =30000

Number of shares issued at year end :

Beginning	30000
Stock dividend issued [30000*100%]	30000
Total shares issued at year end	60000

1)	common stock,par $1 authorized shares 100000 shares ,issued 60000 shares	2) 60000*1	60000
	capital in excess of par value	3)	60000
	Total contributed capital	4)	120000
	Retained earning	5)	90000
6)	Treasury stock ,1000 shares	7)	8000
	Total stockholders equity	8) 4+5-7	202000

Retained earning at year end =Beginning+ net income -stock dividend -cash dividend

                            = 140000 + 25000 - 60000 - 15000

                           = 90000

In case of large stock dividend ,Retained earning is debited and common stock is credited with par value of stock dividend issued.