Question

P15.3 (L01, 2, 3, 4) (Equity Transactions and Statement Preparation) Hatch Company has two classes of capital stock outstanding: 8%, $20 par preferred and $5 par common. At December 31, 2020, the following accounts were included in stockholders' equity. Preferred Stock, 150,000 shares $ 3,000,000 Common Stock, 2,000,000 shares 10,000,000 Pald-in Capital in Excess of Par-Preferred Stock 200,000 Paid-in Capital in Excess of Par--Common Stock 27,000,000 Retained Earnings 4,500,000 The following transactions affected stockholders' equity during 2021. Jan. 1 30,000 shares of preferred stock issued at $22 per share. Feb. 1 50,000 shares of common stock issued at $20 per share. June 1 2-for-1 stock split (par value reduced to $2.50). July 1 30,000 shares of common treasury stock purchased at $10 per share. Hatch uses the cost method. Sept. 15 10,000 shares of treasury stock reissued at $11 per share. Dec. 31 The preferred dividend is declared, and a common dividend of 50¢ per share is declared. Dec. 31 Net Income is $2,100,000. Instructions Prepare the stockholders' equity section for Hatch Company at December 31, 2021. Show all supporting computations For Prob. I changed the facts that there was a 20% stock dividend (rather than a 2:1 stock split) but omitted to include the fair market value of the stock which was $9 at the date of declaration.

Answer 1

Answer to P15.3 (First question in the list):

$3,600,000 $10,250,000 $13,850,000 HATCH COMPANY Balance Sheet (Partial) December 31, 2021 Stockholders' Equity: Contributed Capital (or) Paid-in-Capital: Capital Stock: 8% Preferred stock, $20 par value, 180,000 shares issued & outstanding Common stock, $2.5 par value, 4100000 shares issued; 4080000 shares outstanding; Total Capital Stock Additional Pad-in-Capital: Additional Paid-in-capital in excess of Par-Preferred Additional Paid-in-capital in excess of Par-Common Additional Paid-in-capital in excess of Par-Treasury Total Paid-in-capital Retained earnings Total Paid-in-capital & Retained Earnings Treasury Stock Total Stockholders' Equity $260,000 $27,750,000 $10,000 $41,870,000 $4,272,000 $46,142,000 $200,000 $45,942,000 Workings: HATCH COMPANY Stockholders' Equity Statement

Events Preferred Stock Retained Earnings December 31, 2021 Paid-in-Capital Paid-in-Capital" Common in Excess of in Excess of Par Stock Par Preferred Common $10,000,000 $200,000 $27,000,000 $60,000 $0 $250,000 $750,000 $0 $4,500,000 $3,000,000 $600,000 $0 $0 $0 Paid-in- Treasury Capital in Total Stock Excess of Par Treausry $0 $44,700,000 $0 $660,000 (30,000 x $22] $0 $1,000,000 [50,000 x $20] $0 $0 [No change in equity] $300,000 $0 $300,000 (30,000 x $10] $100,000 $10,000 $110,000 (10,000 x $11] $0 $288,000 [($3000000+$600000) x 8%] $0 $2,040,000 [(4100000-30000+10000) < $0.50] $0 $2,100,000 $200,000 $10,000 $45,942,000 $0 $0 Beginning balance Jan. 1: 30,000 preferred shares at $22/share Feb. 1: 50,000 common shares at $20/share Jun. 1: 2-for-1 stock split (par became $2.50) Jul. 1: 30,000 treasury stock purchased $10/share Sep.15: 10,000 treasury stocks reissued $11/share Dec.31: Preferred dividend declared Dec.31: Common dividend declared $0.50/share Net income for the year was $2,100,000 Ending balance So 02 $0 $0 $0 $288,000 $2,040,000 $2,100,000 $4,272,000 $0 $0 $27,750,000 $0 $3,600,000 $10,250,000 $260,000 NOTE: When 2:1 stock dividend was declared on Jun. 1, number of shares oustanding would have increased from 2,050,000 to 4,100,000 as 2 shares for each 1 share would be issued; On Dec. 31, when cash dividend for common stock was declared, # of common shares oustanding would be: 4,100,000 - 30,000 + 10,000 = 4,080,000 When $0.50 per share cash dividend was declared, total cash dividend would be: 4080000 shares x $0.50 = $2040000.