Question 4 Thestockholders\' equity section of Kay Corporation at the end of the

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Question 4

Thestockholders' equity section of Kay Corporation at the end of thecurrent year showed:

Preferredstock (7%, $60 par, 8,000 shares issued & outstanding)........      ?

Commonstock ($9 par, 62,000 shares issued, 58,750 shares outstanding)..   558,000

Paid-incapital – preferred stock.......................................     ?

Paid-incapital – common stock..........................................   806,000

Retainedearnings.......................................................  125,000

Less: Treasury stock (3,250 shares at cost)............................   <48,750>

Totalstockholders' equity..............................................     ?

Question 4

Explanation / Answer

The preferred stock account is simply calculated as shares issued *par = 8,000 * 60 = $480,000. Any remaining cash made through the sale of preferred stock iscredited to the Additional Paid in Capital Account.

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