The shareholders’ equity section of Superior Corporation’s balance sheet as of D

Question

The shareholders’ equity section of Superior Corporation’s balance sheet as of December 31, 2015, is as follows: Shareholders’ Equity Preferred stock, $100 par value; authorized, 300,000 shares; issued, 33,000 shares $3,300,000 Common stock, $5 par value; authorized, 2,000,000 shares; issued, 377,000 shares 1,885,000 Paid-in capital in excess of par—preferred 96,000 Paid-in capital in excess of par—common 825,000 Retained earnings 2,920,000 $9,026,000 The following events occurred during 2016: Jan. 5 10,500 shares of authorized and unissued common stock were sold for $7 per share. 16 10,000 shares of authorized and unissued preferred stock were sold for $108 per share. Apr. 1 79,000 shares of common stock were repurchased for the treasury at a price of $21 per share. Superior uses the cost method to account for treasury stock. Sept. 1 3,500 shares of preferred stock are issued in exchange for a piece of land. The land has an appraised value of $389,500. The preferred stock currently trades on the New York Stock Exchange at a price of $109 per share. Dec. 1 24,000 shares of treasury stock are reissued at a price of $24 per share. Required: 1. Prepare journal entries for each of the above transactions. 2. Calculate the number of authorized, issued, and outstanding common shares as of December 31, 2016. 3. Calculate Superior’s legal capital at December 31, 2016.

Explanation / Answer

1. In the books of Superior Corporation :

2.Number of Common Shares: December 31, 2016

3. Legal capital = Issued Capital x Par Value

Superior's Legal Capital: December 31, 2016

Date Account Titles Debit Credit 2016 $ $ Jan 5 Cash ( 10,500 x $ 7) 73,500 Common Stock ( 10,500 x $ 5) 52,500 Paid-in Capital in Excess of Par: Common Stock 21,000 Jan 16 Cash ( 10,000 x $ 108) 1,080,000 Preferred Stock ( 10,000 x $ 100) 1,000,000 Paid-in apital in Excess of Par: Preferred Stock 80,000 April 1 Trasury Stock ( 79,000 x $ 21) 1,659,000 Cash 1,659,000 Sept 1 Land 389,500 Preferred Stock ( 3,500 x $ 100) 350,000 Paid in Capital in Excess of Par: Preferred Stock 39,500 Dec 1 Cash ( 24,000 x $ 24) 576,000 Treasury Stock ( 24,000 x $ 21) 504,000 Paid-in Capital : Treasury Stock 72,000

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