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 $729,000 cash and issued 27,000 shares of common stock. b. Issued 18,500 shares of preferred stock at $37 per share; collected in cash. Net income for the year was $57,000; cash dividends declared and paid at year-end were $11,000. Required: Prepare the stockholders’ equity section of the balance sheet at December 31.

Preferred Stock _______

Additional Paid-in Capital, Preferred Stock ______

Common Stock ______

Additional Paid-in campital, common stock _____

Retained Earnings

Explanation / Answer

cash debit 729000 common stock credit 27000 additional paid in capital 702000 cash debit 684500 credit preferred stock 185000 credit additional paid in capiral 499500 Net income for the year 57000 less preferred dividend 11100 11100 less equity dividend 11000 retained earnings 34900 Balance sheet Equity: preferred stock 185000 additional paid in capital 499500 common stock 27000 additional paid in capital 702000 retained earnings 34900 total share holdersequity 1448400

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