Exercise 10-7 Prepare the stockholders\' equity section (LO10-7) Finishing Touch
ID: 2531247 • Letter: E
Question
Exercise 10-7 Prepare the stockholders' equity section (LO10-7)
Finishing Touches has two classes of stock authorized: 7%, $10 par preferred, and $1 par value common. The following transactions affect stockholders' equity during 2018, its first year of operations:
January 2 Issues 100,000 shares of common stock for $24 per share.
February 6 Issues 1,900 shares of 7% preferred stock for $13 per share.
September 10 Repurchases 12,000 shares of its own common stock for $29 per share.
December 15 Reissues 6,000 shares of treasury stock at $34 per share.
In its first year of operations, Finishing Touches has net income of $149,000 and pays dividends at the end of the year of $94,000 ($1 per share) on all common shares outstanding and $1,330 on all preferred shares outstanding.
Required:
Prepare the stockholders' equity section of the balance sheet for Finishing Touches as of December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.)
FINISHING TOUCHES Balance Sheet (Stockholders' Equity Section) December 31, 2018 Stockholders' equity: Total paid-in capital Total stockholders' equityExplanation / Answer
CALCULATION OF BALANCES OF COMMON STOCK Par Value Addittional paid in capital Issue 100,000 shares of Common stock = $ 1,00,000 $ 23,00,000 (100,000 X 1) (100,000 X 23) Less: Repurchase of shares 12,000 $ -12,000 Add: Reissue the shares $ 6,000 Balance in commons shareholder $ 94,000 $ 23,00,000 Treasurry Stock Par Value Addittional paid in capital Purchase Cost @ $ 29 per shares for 12000 shares= $ 3,48,000 $ - Less: Reissue of 6000 Shares $ 1,74,000 $ 30,000 (6,000 X $ 29) (6,000 X $ 5) Balance $ 1,74,000 $ 30,000 CALCULATION OF BALANCES OF PREFERRED STOCK Preferred Stock 1,900 Shares of $ 13 $ 19,000 $ 5,700 (1900 X 10) (1900 X 3) CALCULATION OF THE BALANCE IN RETAIEND EARNINGS Net Income = $ 1,49,000 Less: Dividends Common Dividend $ 94,000 Preferred Dividend $ 1,330 Balance transferred to Retaine earnings $ 53,670 STOCKHOLDER'S EQUITY SECTION AS ON DECEMBER 31, 2018 AMOUNT Stockholder's Equity: Common stock 100,000 shares, $ 1 par value $ 1,00,000 Preferred Capital 1900 Shares of $ 10 $ 19,000 $ 1,19,000 Addittional paid in capital : Addittional paid in capital for common stock $ 23,00,000 Addittional paid in capital for Preferred stock $ 5,700 $ 23,05,700 Retained Earnings $ 53,670 Treasurry Stock $ 1,74,000 Less: Addittional paid in capital of treasurry stock $ 30,000 $ 1,44,000 Total Stockholder's Equity $ 23,34,370
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.