Question

Exercise 11-21

Dirk Company reported the following balances at December 31, 2018: common stock $500,000, paid-in capital in excess of par value—common stock $100,000, and retained earnings $250,000. During 2019, the following transactions affected stockholders' equity.

1.		Issued preferred stock with a par value of $125,000 for $200,000.
2.		Purchased treasury stock (common) for $40,000.
3.		Earned net income of $180,000.
4.		Declared and paid cash dividends of $56,000.

Prepare the stockholders’ equity section of Dirk Company’s December 31, 2019, balance sheet.

Answer 1

Answer
Dirk Company
Balance Sheet (Partial)
Paid-in capital	Amount $	Amount $
Capital stock
Preferred stock	$   125,000
Common stock	$   500,000
Total capital stock		$    625,000
Additional paid-in capital
In excess of par–preferred stock	$     75,000
In excess of par–common stock	$   100,000
Total additional paid-in capital		$    175,000
Total paid-in capital		$    800,000
Retained earnings		$    374,000
(250000+180000-56000)
Total paid-in capital and retained earnings		$ 1,174,000
Less : treasury stock–common		-$      40,000
Total stockholder's equity		$ 1,134,000

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