Question

The equity section of the December 31, 2019, balance sheet for Delicious Alternative Desserts Inc. showed the following: Delicious Alternative Desserts Inc. Equity Section of the Balance Sheet December 31, 2019Contributed capital: Preferred shares, $0.40 cumulative; 80,000 shares authorized; 50,000 shares issued and outstanding$200,000 Common shares; 250,000 shares authorized; 110,000 shares issued and outstanding 176,000 Total contributed capital$376,000 Retained earnings 148,000 Total equity$524,000 During the year 2020, the company had the following transactions affecting equity accounts: Jan.3 Sold 10,000 common shares for a total of $17,200 cash.Mar.1 Sold 5,000 preferred shares at $3.80 each; cash.June15 Exchanged 7,000 common shares for equipment with a fair market value of $21,000. The last common share trade was dated March 15 at $4.78.Dec.31 Closed the Income Summary account, which showed a credit balance of $270,000. The board of directors had not declared dividends for the past two years (2019 and 2020).

Prepare the equity section as at December 31, 2020.

Answer 1

Calculation

Date	General Journal	Debit	Credit
Jan 3	Cash	17,200
	Common stock		17,200
	(To record issue of common stock.)
Mar 1	Cash (5000*3.80)	19,000
	Preferred stock		19,000
	(To record issue of preferred stock.)
June 15	Equipment	21,000
	Common stock		21,000
	(To record issue of common stock in exchange of equipment.) (Current market price prior of this trasnaction is not relvant.)
Dec 31	Income summary	270,000
	Retained earnings		270,000
	(To record close the net income)

Number of common shares issued and outstanidngs (110000+10000+7000)	127,000
Number of preffed shares issued and outstanidngs (50000+5000)	55,000

Answer:

Delicious Alternative Desserts Inc.
Equity Section of the Balance Sheet
At December 31, 2019
Contributed Capital:
Preferred shares, $0.40 cumulative; 80,000 shares authorized; 55,000 shares issued and outstanding (200000+19000)		$        219,000
Common shares; 250,000 shares authorized; 127,000 shares issued and outstanding (176000+17200+21000)		$        214,200
Total contributed capital		$        433,200
Retained earnings (148000+270000)		$        418,000
Total Stockholder's Equity		$        851,200