Question

Finishing Touches has two classes of stock authorized: 7%, $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 $21 per share. February 6 Issues 1,600 shares of 7% preferred stock for $13 per share. September 10 Purchases 12,000 shares of its own common stock for $26 per share. December 15 Resells 6,000 shares of treasury stock at $31 per share. In its first year of operations, Finishing Touches has net income of $146,000 and pays dividends at the end of the year of $94,000 ($1 per share) on all common shares outstanding and $1,120 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

Finishing Touches
Balance sheet
(Stockholder's Equity Section)
At December 31, 2021
Stockholder's Equity:
Preferred stock	$                   16,000
Common stock	$                1,00,000
Additional Paid - in - Capital	$             20,34,800
Total Paid - in Capital	$             21,50,800
Retained earnings	$                   50,880
Treasury Stock	$              -1,56,000
Total Stockholder's Equity	$             20,45,680
Workings:
Paid in capital in excess of par value, Common stock (100000 X $20)	$             20,00,000
Paid in capital in excess of par value, Preferred stock (1600 X $3)	$                      4,800
Paid in capital in from sale of treasury stock [6000 X ($31-$26)]	$                   30,000
Additional Paid - in - Capital	$             20,34,800
Net Income	$                1,46,000
Dividend Paid	$                  -94,000
Dividend Accrued	$                    -1,120
Retained earnings	$                   50,880
Treasury Stock	(12000-6000)*26
	$                1,56,000