Question

Problem 15-3

Hatch Company has two classes of capital stock outstanding: 7%, $20 par preferred and $5 par common. At December 31, 2014, the following accounts were iHatch Company has two classes of capital stock outstanding: 7%, $20 par preferred and $5 par common. At December 31, 2014, the following accounts were included in stockholders’ equity.

Preferred Stock, 151,800 shares		$ 3,036,000
Common Stock, 2,120,000 shares		10,600,000
Paid-in Capital in Excess of Par—Preferred Stock		203,700
Paid-in Capital in Excess of Par—Common Stock		27,240,000
Retained Earnings		4,547,000

The following transactions affected stockholders’ equity during 2015.

Jan. 1		40,300 shares of preferred stock issued at $22 per share.
Feb. 1		53,500 shares of common stock issued at $21 per share.
June 1		2-for-1 stock split (par value reduced to $2.50).
July 1		39,700 shares of common treasury stock purchased at $9 per share. Hatch uses the cost method.
Sept. 15		10,600 shares of treasury stock reissued at $11 per share.
Dec. 31		The preferred dividend is declared, and a common dividend of 55¢ per share is declared.
Dec. 31		Net income is $2,279,000.

Prepare the stockholders’ equity section for Hatch Company at December 31, 2015.

Answer 1

Hatch Company
Stockholders’ Equity Section of the Balance Sheet
For the year ended December 31, 2015
Shareholders’ Equity;
Preferred Stock, 192100 shares @ $20 par value	$3842000
Common Stock, 4347000 shares @ $2.50 par value
Additional paid in capital-common stock ($27240000 + $856000)	$28096000
Additional paid in capital-preferred stock ($203700 + $80600)	$284300
Additional paid in capital-Treasury stock ($10600 * $2))	$21200
Total contributed capital	$32243500
Retained earnings	$4166210
Less: Treasury stock (29100 * $9)	($261900)
Total stockholders’ equity	$36147810

Working Note;

Beginning balance	$4547000
Add: Net income	$2279000
Less: Preferred dividend paid	($268940)
Less: Common stock dividend paid (4347000 * 0.55)	($2390850)
Ending retained earnings	$4166210