Question

Exercise 11-21

Dirk Company reported the following balances at December 31, 2016: common stock $391,000, paid-in capital in excess of par value—common stock $109,000, and retained earnings $242,000. During 2017, the following transactions affected stockholders' equity.

1.		Issued preferred stock with a par value of $122,000 for $204,000.
2.		Purchased treasury stock (common) for $39,000.
3.		Earned net income of $143,500.
4.		Declared and paid cash dividends of $51,000.

Prepare the stockholders’ equity section of Dirk Company’s December 31, 2017, balance sheet.

Answer 1

Statement of stockholder's equity
Particulars			amount
Share holder equity
preferred stock (a)			$       1,22,000.00
common stock (b)			$       3,91,000.00
total capital stock (a)+(b) = ( c)			$       5,13,000.00
additional paid in capital
paid in capital in excess of par- preferred stock (204000-122000)			$           82,000.00
paid in capital in excess of par- common stock			$       1,09,000.00
total excess paid in capital (d)			$       1,91,000.00
total paid in capital ( c)+(d) = ( e)			$       7,04,000.00
retained & earning (f)			$       3,34,500.00
total (e )+(f)			$     10,38,500.00
less: treasury stock			$           39,000.00
total stockholder equity			$       9,99,500.00
Retained & earning= beginning retained earning+net income-dividend paid