Question

Finishing Touches has two classes of stock authorized: 8%, $10 par preferred, and $1 par value common. The following transactions affect stockholders' equity during 2021, its first year of operations: January 2 Issues 100,000 shares of common stock for $17 per share. February 6 Issues 1,200 shares of 8% preferred stock for $12 per share. September 10 Purchases 10,000 shares of its own common stock for $22 per share. December 15 Resells 5,000 shares of treasury stock at $27 per share. In its first year of operations, Finishing Touches has net income of $142,000 and pays dividends at the end of the year of $95,000 ($1 per share) on all common shares outstanding and $960 on all preferred shares outstanding. Required: Prepare the stockholders' equity section of the balance sheet for Finishing Touches as of December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.) FINISHING TOUCHES Balance Sheet (Stockholders' Equity Section) December 31, 2021 Stockholders' equity: Total paid-in capital Total stockholders' equity $

Answer 1

Solution:

Finishing Touches
Balance Sheet
Stockholders' Equity section
December 31, 2018
Stockholder's Equity:
Preferred Stock, 7%, $10 Par, 1600 shares issued and outstanding (1200*$10)	$12,000
Paid-in capital in excess of par- Preferred Stock (1200*$2)	$2,400
Common Stock, $1 par, 100000 issued and 95000 outstanding shares	$1,00,000
Paid-in capital in excess of Par value- common stock (100000*$16)	$16,00,000
Paid-in capital from treasury stock [5000*($27-$22)]	$25,000
Total Paid in capital	$17,39,400
Add: Retained earnings ($142000-$95000-$960)	$46,040
Total	$17,85,440
Less: Treasury Stock [(10000-5000)*$22]	-$1,10,000
Total Stockholder's Equity	$16,75,440