Stockholders equity se tion of a blaance sheet When Resisto systems, inc was for
ID: 2572748 • Letter: S
Question
Stockholders equity se tion of a blaance sheet
When Resisto systems, inc was formed the company wa sauthorized to issue 5,000 shares of $100 par valuse, 8 percent cumlative preferred stock and 100,000 shares of $2 stated value common stock.
Half of the preferred stock was issued at a price of $103 per share , and 70,000 shares of the common stock were sold for $13 per share. At the end of teh curretn year, Resisto has retained earnings of $475,000.
a. prepare the stockholders equity section of the companys balance sheet at the end of the current year
b. assume resisto sytems common stock is trading at $24 per share and its preferred stock is trading at $107 per share at the end of the current eyar. Would the stockholders' equity section prepared in part a be affected by this addtional information.
Explanation / Answer
a) Resisto systems Stockholders' Equity $ $ Capital Stock (Authorized) Cumulative Preferred stock (5000 shares of $100 par value) 500000 Common stock (100000 shares of $2 states value) 200000 Total capital stock 700000 Capital Stock (Issued) Cumulative Preferred stock (2500*100) 250000 Common stock (70000*2) 140000 Total capital stock 390000 Additional paid-in capital Paid-in capital in excess of par-preferred stock (2500*3) 7500 Paid-in capital in excess of par-Common stock (70000*11) 770000 777500 Total paid-in capital 1167500 Retained earnings 475000 Total paid-in capital & Retained earnings 1642500 Less: Treasury stock 0 Total stockholders' equity 1642500 b) The stockholders' section will not be affected by the trading value of common stock or preferred stock. In stockholder's equity statement the common stock and preferred stock always recorded at the par value and the stated value. The difference between par value/stated value and the issue price will be transferred to paid-in capital
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