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: 2 Issues 100,000 shares of common stock for $30 per share. Issues 2,500 shares of 7% preferred stock for $13 per share January February September 10 Purchases 12,000 shares of its own common stock for $35 per share December 15 Resells 6,000 shares of treasury stock at $40 per share. In its first year of operations, Finishing Touches has net income of $155,000 and pays dividends at the end of the year of $94,000 ($1 per share) on all common shares outstanding and $1,750 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: Common stock Preferred stock Additional paid-in capital Additional paid-in capital Total paid-in capital 0 Retained earnings Treasury stock Total stockholders' equity Next> Prey 7 of 16

Answer 1

Finishing Touches
Balance sheet
(Stockholder's Equity Section)
At December 31, 2021
Stockholder's Equity:
Preferred stock	$                   25,000
Common stock	$               1,00,000
Additional Paid - in - Capital	$             29,37,500
Total Paid - in Capital	$             30,62,500
Retained earnings	$                   59,250
Treasury Stock	$              -2,10,000
Total Stockholder's Equity	$             29,11,750
Workings:
Paid in capital in excess of par value, Common stock (100000 X $29)	$             29,00,000
Paid in capital in excess of par value, Preferred stock (2500 X $3)	$                     7,500
Paid in capital in from sale of treasury stock [6000 X ($40-$35)]	$                   30,000
Additional Paid - in - Capital	$             29,37,500
Net Income	$               1,55,000
Dividend Paid	$                 -94,000
Dividend Accrued	$                    -1,750
Retained earnings	$                   59,250
Treasury Stock	(12000-6000)*35
	$               2,10,000