VI. Stockholders\' Equity Section of the Balance Sheet Story: On January 1, Roge

Question

VI. Stockholders' Equity Section of the Balance Sheet

Story: On January 1, Roger Company issued 100,000 shares of its $5.00 par common stock. Additionally, the company issued 10,000 shares of $50 par preferred stock. In its first year, the company made net income of $60,000 and paid dividends (common + preferred) in cash of $20,000. Show how the stockholders' equity statement would appear on the 12/31 balance sheet.

Stockholders' Equity

Balances

Preferred Stock

$

Common Stock

$

Total Paid in Capital

$

Retained Earnings

$

Total Stockholders' Equity

$

Stockholders' Equity

Balances

Preferred Stock

$

Common Stock

$

Total Paid in Capital

$

Retained Earnings

$

Total Stockholders' Equity

$

Explanation / Answer

Stockholder's Equity Balances ($) Preferred stock        5,00,000 Common Stock        5,00,000 Total paid in Capital      10,00,000 Retained earning           40,000 Total Stockholder's Equity      10,40,000 Working: Particulars          Quantity * Issue Price = Total Proceeds Preferred Stock            10,000 * 50 =    5,00,000 Common Stock         1,00,000 *      5 =    5,00,000 Total Paid in Capital 10,00,000 Net Income            60,000 Less: Divididend Paid            20,000 Retained Earning            40,000

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