Shelby Corporation was organized in January to operate an air-conditioning sales

Question

Shelby Corporation was organized in January to operate an air-conditioning sales and service business. The charter issued by the state authorized the following capital stock: Common stock, $1 par value, 200,000 shares. Preferred stock, $10 par value, 6 percent, 50,000 shares. During January and February, the following stock transactions were completed: a. Collected $900,000 cash and issued 30,000 shares of common stock. b. Issued 20,000 shares of preferred stock at S40 per share, collected in cash. Net income for the year was $60,000; cash dividends declared and paid at year-end were $11,000 Required: Prepare the stockholders' equity section of the balance sheet at December 31. SHELBY CORPORATION Balance Sheet (Partial) At December 31 Stockholders' Equity Contributed Capital Preferred Stock Common Stock Total Contributed Capital Total Stockholders' Equity

Explanation / Answer

Preferred share capital          20,000               10          200,000 Additional paid in capital          20,000               30          600,000 Equity Share capital          30,000                 1            30,000 Additional paid in capital          30,000               29          870,000 Net income for the year            60,000 Equity dividend          (11,000) Preference dividend       200,000 6%          (12,000) Retained earnings            37,000 Shelby Corporation Balance Sheet Equity Section Contributed capital Preference capital       200,000 Equity capital          30,000 Additional Paid in capital    1,470,000 Retained earnings          37,000 Total Stock holer equity    1,737,000

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