The Quick chips company, a fast food manufacturer, began operations in January 2

Question

The Quick chips company, a fast food manufacturer, began operations in January 2007. It issued 50,000 shares of $.25 par value common stock. The stock sold for $20 per share. There are 600,000 shares authorized. In 2009 the company repurchased 15,000 shares of stock at a cost of $26 per share. Quick Chips’ net income and cash dividend payments have been as follows:

Year       Net Income              Dividends
2007      (100,000)                   0
2008       250,000                   75,000
2009       400,000                 150,000

Draft the stockholder’s equity section of Quick Chip’s balance sheet for the years ended December 31, 2008 and 2009.

Explanation / Answer

Stockholders’ equity section on 31 Dec 2007 Common stock—$0.25 par value, 600,000 shares authorized, 50,000 shares issued and outstanding . . . . . . . . . . . $ 12,500 Contributed capital in excess of par value, common stock . . . . . . $ 987,500 Total contributed capital . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000,000 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .($100,000) Total stockholders’ equity 31 Dec 2007 . . . . . . . . . . . . . . . . . . . $900,000 Stockholders’ equity section on 31 Dec 2008 Common stock—$0.25 par value, 600,000 shares authorized, 50,000 shares issued and outstanding . . . . . . . . . . . $ 12,500 Contributed capital in excess of par value, common stock . . . . . . $ 987,500 Total contributed capital . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,000,000 Retained earnings . . . . . . . . . .(250000-75000) . . . . . . . . . . . $175,000 Total stockholders’ equity 31 Dec 2008 . . . . . . . . . . . . . . . . . . $1,175,000 Stockholders’ equity section on 31 Dec 2009 Common stock—$0.25 par value, 600,000 shares authorized, 35,000 shares issued and outstanding . . . . . . . . . . . $ 8,750 Contributed capital in excess of par value, common stock . . . . . . $ 987,500 Total contributed capital . . . . . . . . . . . . . . . . . . . . . . . . . . . $996,250 Retained earnings . . . . . . . . . .(400000-150000) . . . . . . . . . . . $250,000 Treasury Stock (15000 Shares@$26)..................................... $390,000 Total stockholders’ equity 31 Dec 2009 . . . . . . . . . . . . . . . . . . $1,636,250

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