Question

Problem 10-5B Understand stockholders equity and the statement of tockholders' equity

Chec Required information Problem 10-5B Understand stockholders' equity and the statement of stockholders' equity (LO10-7) (The following information applies to the questions displayed below) Nautical has two classes of stock authorized: $10 par preferred, and $1 par value common. As of the beginning of 2021, 100 shares of preferred stock and 2,900 shares of common stock have been issued. The following transactions affect stockholders' equity during 2021: March 1 Issue 2,900 additional shares of common stock for $11 per share. April 1 Issue 200 additional shares of preferred stock for $39 per share! June 1 Declare a cash dividend on both common and preferred stock of $0.30 per share all stockholders of record on June 15. June 30 Pay the cash dividends declared on June 1. August 1 Purchase 200 shares of common treasury stock for 58 per share, October 1 Resell 100 shares of treasury stock purchased on August 1 for $10 per share. Nautical has the following beginning balances in its stockholders' equity accounts on January 1, 2021. Preferred Stock, $1,000; Common Stock, $2,900; Additional Paid-in Capital, $19,400, and Retained Earnings, $11,400. Net income for the year ended December 31, 2021, is $7,600 Taking into consideration the beginning balances on January 1, 2021 and all the transactions during 2021, respond to the following for Nautical:

Answer 1

Treasury Stock : It is the stock which is reacquired by the company and has not been retired. When the treasury stock is issued above the cost at which the treasury stock is acquired, the difference between the issue price of treasury stock and cost of treasury stock is credited Paid in Capital Treasury Stock and treasury stock is credited at cost price. When the treasury stock is issued below the cost at which the treasury stock is acquired, the difference between the issue price and cost of treasury stock is debited Paid in Capital Treasury Stock to the amount available in the Paid in Capital Treasury Stock and the remaining is debited to retailed earnings account and treasury stock is credited at cost price.

Debit Credit Date Account Title [2900 x $11] $2,900 [2900x $1] $29,000 [2900 x $10] Cash Common Stock Additional Paid in Capital (To record issue of common stock) $31,900 Mar 1 [200 x $39] $2,000 [200 x $10] $5,800 [200 x $29] Cash Preferred Stock Apr 1 $7,800 Additional Paid in Capital (To record issue of preferred stock) Retained Earnings Dividend Payable (To record declaration of dividend) Dividend Payable (100+200+29 $1,830 00+2900)x $1,830 June 1 $0.30] June 30 $1,830 Cash (To record payment of dividend) Treasury Stock Cash (To record purchase of treasury stock) $1,830 [200 x $8] $1,600 Aug 30 $1,600 Cash Additional Paid in Capital $1,000 [100 x $10] $200 [100 x $2] $800 [100 x $8] Oct 1 Treasury Stock (To record reissue of treasury stock)

Nautical 1 Balance Sheet Stockholders' Equity Section December 31, 2021 Stockholders Preferred Stock Common Stock $3,000 [$1000+S2000] $5,800 [$2900+S2900] $54,400 [S19400+$29000+$5800+$ 200] Additional Paid in Capital Paid in Capital Reatined Earnings Less: Treasury Stock Total Stockholders' Equity $63,200 $17,170 [$11400+$7600-$1830] ($800) $79,570 Nautical 2 Statement of Stockholders' Equity For the year ended 31st Decembr, 2021 Total Additional Paid in Capital Preferred Reatined Common stock Treasury Stock Stockholders" Stock Earnings Equity Balance January, 1 Issue of common stock $1,000 $2,900 $19,400 $11,400 $34,700 $2,900 $29,000 $31,900 Issue of Preferred stock Declare Cash Dividend Purchase Treasury Stock Resell Treasury Stock $2,000 $5,800 $7,800 ($1,830) ($1,830) ($1,600) ($1,600) $200 $800 $1,000 $7,600 $7,600 Net Income Balance December, 31 $3,000 $5,800 $54,400 $17,170 ($800) $79,570