Question

Leiker Corporation has these accounts at December 31: Common Stock, $10 par, 5,000 shares issued, $50,000; Paid-in Capital in Excess of Par Value $22,000; Retained Earnings $42,000; and Treasury Stock, 500 shares, $11,000.

Prepare the stockholders

Answer 1

Concepts and reason

Balance Sheet:

Balance sheet is prepared to forecast the assets, liabilities and stockholders’ equity of a company for a period of time. It is prepared to estimate the financial position of the company.

The balance sheet includes current assets and fixed assets. The current liabilities of the company are to be deducted from the current assets. The capital balance in the balance sheet is to be shown after adding the net profit for the year and drawings is to be deducted from the capital balance.

Fundamentals

Stockholders’ equity:

The shareholders’ equity section of balance sheet presents the amount of the total stockholders’ equity when the balance sheet is prepared. In the stockholders’ equity section of the balance sheet the total stockholders’ equity is computed by adding the capital stock, additional paid in capital and retained earnings.

Common shares refer to the shares which constitute ownership in a company. The common shareholders are treated as the owners of the company. The voting rights are provided to the common shareholders.

Treasury stock refers to the stock that the issuing company itself has bought back so that they can bring down the amount of stock that is outstanding in the open market. It is referred to as a financing activity for the company.

The stockholders’ equity section of the balance sheet will be prepared by deducting the treasury stock from the total paid-in capital and retained earnings. The total paid in capital is computed by adding the common stock and additional paid in capital.

Prepare the stockholders’ equity section of the balance sheet.

Following schedule shows the stockholders’ equity section of the balance sheet:

Following schedule shows the calculation:

Ans: