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TechChip began business on January 1 and immediately issued 600,000 shares of its $7 par value...

TechChip began business on January 1 and immediately issued 600,000 shares of its $7 par value common stock for $15,000,000. At the end of the year it paid $450,000 in cash dividends. In midyear, the firm bought back some of its own shares. The company reports the following additional information at December 31:

Net income

$3,500,000

Retained earnings beginning of year

$260,000

Common shares authorized

2,000,000

Shares outstanding at year end

500,000
  1. How much is the Additional Paid-in Capital account at the end of the year?
  2. Determine the retained earnings amount at the end of the year.
  3. How many shares of stock are in the treasury at the end of the year?
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Answer #1

1. The company issued 600000 shares for $15000000. Total price per share = 15000000/600000 = 25

Par value of share = 7

Additional paid-in capital per share = 25-7 = 18

No. of share outstanding at the end of the year = 500000.

Total additional paid-in capital at the end of the year = 500000*18 = $9,000,000

2. Opening balance of retained earnings = 260,000

(+) Net income for the year = 3,500,000

(-) Cash dividend paid = -450,000

Closing balance of retained earnings = 260000+3500000-450000 = $3,310,000

3. Shares issued at the beginning of the year = 600,000

Shares outstanding at the end of the year = 500,000

No. of shares in treasury at the end of the year = 600,000 - 500,000 = 100,000 shares.

Hope this helps :)

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