Capital Stock Stahl Company was incorporated as a new business on January 1, 201

Question

Capital Stock Stahl Company was incorporated as a new business on January 1, 2013. The company is authorized to issue 600,000 shares of $2 par value common stock and 80,000 shares of 6%, $20 par value, cumulative preferred stock. On January 1, 2013, the company issued 75,000 shares of common stock for $15 per share and 5,000 shares of preferred stock for $25 per share. Net income for the year ended December 31, 2013, was $500,000. Required: What is the amount of Stahl's total contributed capital at December 31, 2013?

Explanation / Answer

Contributed capital by common stock (75000 x 2) = $1,50,000

Add: Contributed capital by preferred stock (5000 x 20) = $1,00,000

Thus Stahl's total contributed capital at December 31, 2013 = $2,50,000.

Note :

Net profit of current year and excess over par value is not a part of contributed capital but is a part of shareholders' equity.

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