Question

Finishing Touches has two classes of stock authorized: 8%, $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 $31 per share.

February 6 Issues 2,600 shares of 8% preferred stock for $12 per share.

September 10 Purchases 10,000 shares of its own common stock for $36 per share.

December 15 Reissues 5,000 shares of treasury stock at $41 per share.

In its first year of operations, Finishing Touches has net income of $156,000 and pays dividends at the end of the year of $95,000 ($1 per share) on all common shares outstanding and $2,080 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

FINISHING TOUCHES Balance Sheet (Stockholders’ Equity Section) December 31, 2018
Stockholders’ equity:
Common stock ( 100,000 Shares x $ 1)	$ 100,000
Paid in capital in excess of par value-Common Stock ( 100,000 x ( $ 31 (-) 1 )	$ 3,000,000
Preferred stock ( 2,600 Shares x $ 10)	$ 26,000
Paid in capital in excess of par value-Preferred stock ( 2,600 Shares x( $ 12 (-) $ 10)	$ 5,200
Paid in capital from sale of treasury stock    ( 5,000 Shares x $ 41 (-) $ 36)	$ 25,000
Total Paid-in capital	$ 3,156,200
Retained earnings ( $ 156,000 (-) $ 95,000 (-) $ 2,080)	$ 58,920
Treasury stock ( 5,000 Shares x $ 36)	($ 180,000)
Total Stockholders’ equity	$ 3,035,120