Finishing Touches has two classes of stock authorized: 7%, $10 par preferred, an

Question

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 $15 per share.

February 6 Issues 1,000 shares of 7% preferred stock for $13 per share.

September 10 Repurchases 12,000 shares of its own common stock for $20 per share.

December 15 Reissues 6,000 shares of treasury stock at $25 per share.

In its first year of operations, Finishing Touches has net income of $140,000 and pays dividends at the end of the year of $94,000 ($1 per share) on all common shares outstanding and $700 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.)

Explanation / Answer

Prepare the stockholders' equity section of the balance sheet for Finishing Touches as of December 31, 2018

Stockholder's equity Paid in capital Common Stock 100000 Paid in capital in excess of par value-Common Stock 1400000 Preferred stock 10000 Paid in capital in excess of par value-Preferred stock 3000 Paid in capital from sale of treasury stock 30000 Total paid in capital 1543000 Retained earnings 45300 Total 1588300 Less : Treasury stock -120000 Total stockholder's equity 1468300

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