Question

Finishing Touches has two classes of stock authorized: 7%, $10 par preferred, and $1 par value common. The following transactions affect stockholders' equity during 2018, its first year of operations:

  
January 2 Issues 100,000 shares of common stock for $15 per share.

February 6 Issues 1,000 shares of 7% preferred stock for $13 per share.

September 10 Repurchases 12,000 shares of its own common stock for $20 per share.

December 15 Reissues 6,000 shares of treasury stock at $25 per share.

In its first year of operations, Finishing Touches has net income of $140,000 and pays dividends at the end of the year of $94,000 ($1 per share) on all common shares outstanding and $700 on all preferred shares outstanding.

Required:

Prepare the stockholders' equity section of the balance sheet for Finishing Touches as of December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Prepare the stockholders' equity section of the balance sheet for Finishing Touches as of December 31, 2018

Stockholder's equity
Paid in capital
Common Stock	100000
Paid in capital in excess of par value-Common Stock	1400000
Preferred stock	10000
Paid in capital in excess of par value-Preferred stock	3000
Paid in capital from sale of treasury stock	30000
Total paid in capital		1543000
Retained earnings		45300
Total		1588300
Less : Treasury stock		-120000
Total stockholder's equity		1468300