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 $21 per share.

February 6 Issues 1,600 shares of 7% preferred stock for $13 per share.

September 10 Repurchases 12,000 shares of its own common stock for $26 per share.

December 15 Reissues 6,000 shares of treasury stock at $31 per share.

In its first year of operations, Finishing Touches has net income of $146,000 and pays dividends at the end of the year of $94,000 ($1 per share) on all common shares outstanding and $1,120 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.)

Answer 1

Solution:

Finishing Touches
Balance Sheet
Stockholders' Equity section
December 31, 2018
Stockholder's Equity:
Preferred Stock, 7%, $10 Par, 1600 shares issued and outstanding (1600*$10)	$16,000
Paid-in capital in excess of par- Preferred Stock (1600*$3)	$4,800
Common Stock, $1 par, 100000 issued and 94000 outstanding shares	$1,00,000
Paid-in capital in excess of Par value- common stock (100000*$20)	$20,00,000
Paid-in capital from treasury stock [6000*($31-$26)]	$30,000
Total Paid in capital	$21,50,800
Add: Retained earnings ($146000-$94000-$1120)	$50,880
Total	$22,01,680
Less: Treasury Stock [(12000-6000)*$26]	-$1,56,000
Total Stockholder's Equity	$20,45,680