Question

Corporation’s first year of business, the following transactions affected its equity accounts.

• Issued 4,000 shares of $2 par value common stock for $18. It authorized 20,000 shares.
• Issued 1,000 shares of 12%, $10 par value preferred stock for $23. It authorized 3,000 shares.
• Reacquired 200 shares of common stock for $30 each.
• Retained earnings is impacted by reported net income of $50,000 and cash dividends of $15,000.

Prepare the stockholders’ equity section of Draco’s balance sheet as of December 31. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Balance Sheet (partial)
At December 31
Stockholders' Equity:
Paid-in capital:
Capital stock:
Common stock [4,000 x $2 par]	$8,000
Preferred stock [1,000 x $10 par]	$10,000
Total capital stock		$18,000
Additional Capital:
Paid-in capital in excess of par - Common [4,000 x ($18- $2 par)]	$64,000
Paid-in capital in excess of par - Preferred [1,000 x ($23 - $10 par)]	$13,000
Total additional capital		$77,000
Total paid-in capital		$95,000
Retained earnings [$50,000 net income - $15,000 div.]		$35,000
Total stockholders' Equity		$130,000