Question

ACCOUNTING I

Finishing Touches has two classes of stock authorized: 8%, $10 par preferred, and $1 par value common. The following transactions affect stockholders' equity during 2021, its first year of operations:

January 2 Issues 100,000 shares of common stock for $17 per share.

February 6 Issues 1,200 shares of 8% preferred stock for $12 per share.

September 10 Purchases 10,000 shares of its own common stock for $22 per share.

December 15 Resells 5,000 shares of treasury stock at $27 per share.

In its first year of operations, Finishing Touches has net income of $142,000 and pays dividends at the end of the year of $95,000 ($1 per share) on all common shares outstanding and $960 on all preferred shares outstanding. Required: Prepare the stockholders' equity section of the balance sheet for Finishing Touches as of December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)

Required:

Prepare the stockholders' equity section of the balance sheet for Finishing Touches as of December 31, 2021. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Finishing Touches
Partial Balance Sheet
as of December 31, 2021
Stockholders' equity
8% Preferred stock, $10 par value, 1200 shares issued and outstanding	$     12,000.00	(1200*10)
Common stock, $1 par value, 100000 issued and 95,000 shares outstanding	$ 1,00,000.00	(100000*1)
Paid-in capital in excess of par - Preferred stock	$       2,400.00	(1200*(12-10))
Paid-in capital in excess of par - Common stock	$16,00,000.00	(100000*(17-1))
Paid-in capital in excess of par - Treasury stock	$     25,000.00	(5000*(27-22))
Total paid-in capital	$17,39,400.00
Retained earnings	$     46,040.00	(142000-95000-960)
Less treasury stock, 5,000 shares at cost	$ -1,10,000.00	(5000*22)
Total stockholders' equity	$16,75,440.00