Question

National League Gear has two classes of stock authorized: 5%, $20 par preferred, and $5 par value common. The following transactions affect stockholders’ equity during 2021, National League’s first year of operations:

Required information [The following information applies to the questions displayed below.) National League Gear has two classes of stock authorized: 5%, $20 par preferred, and $5 par value common. The following transactions affect stockholders' equity during 2021, National League's first year of operations: February 2 Issue 1.5 million shares of common stock for $15 per share. February 4 Issue 400,000 shares of preferred stock for $24 per share. June 15 Purchase 150,000 shares of its own common stock for $10 per share. August 15 Resell 112,500 shares of treasury stock for $25 per share. November 1 Declare a cash dividend on its common stock of $1.50 per share and a $400,000 (5% of par value) cash dividend on its preferred stock payable to all stockholders of record on November 15. (Hint: Dividends are not paid on treasury stock.) November 30 Pay the dividends declared on November 1. 2. Prepare the stockholders' equity section of the balance sheet as of December 31, 2021. Net income for the year was $4,700,000. (Amounts to be deducted should be indicated by a minus sign.) NATIONAL LEAGUE GEAR Balance Sheet (Stockholders' Equity Section) December 31, 2021 Stockholders' equity: Preferred stock $ 8,000,000 Common stock 7,500,000 Total paid-in capital 15,500,000 Retained earnings Treasury stock Total stockholders' equity 3,937,500 $ 19,437,500

Answer 1

WORKINGS:
	Feb-02	Feb-04	Jun-15	Aug-15	Nov-01	Nov-30	Total
Common stock	$    75,00,000						$     75,00,000
APIC-Common stock	$ 1,50,00,000						$ 1,50,00,000
Preferred stock		$ 80,00,000					$     80,00,000
Retained earnings		$ 16,00,000					$     16,00,000
Treasury stock			$   -15,00,000	$     11,25,000			$ -3,75,000
Paid in capital-Treasury stock				$     16,87,500			$     16,87,500
Retained earnings					$ -25,93,750	$ 47,00,000	$     21,06,250
ANSWER:
Shareholders' equity:
Preferred stock, $20 par, 400000 shares issued and outstanding	$     80,00,000
APIC-Preferred stock	$     16,00,000
Common stock, $5 par, 1500000 shares issued	$     75,00,000
APIC-Common stock	$ 1,50,00,000
Paid in capital-Treasury stock	$     16,87,500
Total paid in capital	$ 3,37,87,500
Add: Retained earnings	$     21,06,250
	$ 3,58,93,750
Less: Treasury stock	$     -3,75,000
Total stockholders' equity	$ 3,55,18,750