Question

When Resisto Systems, Inc., was formed, the company was authorized to issue 5,000 shares of $100 par value, 8 percent cumulative preferred stock, and 100,000 shares of $2 stated value common stock.

Half of the preferred stock was issued at a price of $104 per share, and 56,000 shares of the common stock were sold for $13 per share. At the end of the current year, Resisto has retained earnings of $382,000.

a. Prepare the stockholders’ equity section of the company’s balance sheet at the end of the current year.

	Stockholders' Equity Additional paid-in capital: Total paid-in capital $0 Total stockholders' equity $0

Answer 1

Stockholder's equity

Cumulative Preferred stock	$250,000
Common stock	$112,000
Additional paid-in-capital
Cumulative Preferred stock	$10,000
Common stock	$616,000
Total paid-in-capital	$988,000
Retained earning	$382,000
Total stockholder's equity	1,370,000

Working notes

Cumulative Preferred stock = 2,500 shares *$100 = $250,000

Sold At $104 = 2,500 shares *$104 = $260,000

Additional = ($260,000-$250,000) = $10,000

Common stock = 56,000 shares*$2 = $112,000

Sold At $13 = $56,000*13 = $728,000

Additional = $728,000-$112,000 = $616,000