Question

On January 1, 2018, Fascom had the following account balances in its shareholders' equity accounts. Common...

On January 1, 2018, Fascom had the following account balances in its shareholders' equity accounts.

Common stock, $1 par, 250,000 shares issued 250,000

Paid-in capital—excess of par, common 500,000

Paid-in capital—excess of par, preferred 100,000

Preferred stock, $100 par, 10,000 shares outstanding 1,000,000

Retained earnings 2,000,000

Treasury stock, at cost, 5,000 shares 25,000

During 2018, Fascom Inc. had several transactions relating to common stock.

1. January 15: Declared a property dividend of 100,000 shares of Slowdown Company (book value $10 per share, fair value $9 per share).

2. February 17: Distributed the property dividend.

3. April 10: A 2-for-1 stock split was declared and distributed on outstanding common stock and effected in the form of a stock dividend. The fair value of the stock was $4 on this date.

4. July 18: Declared and distributed a 3% stock dividend on outstanding common stock. The fair value is $5 per share.

5. December 1: Declared a 50 cents per share cash dividend on the outstanding common shares.

6. December 20: Paid the cash dividend.

Required: Without preparing journal entries, prepare the shareholders' equity section of Fascom's balance sheet as of December 31, 2018. Assume net income is $500,000 for 2018.

Homework Answers

Answer #1

Solution

Shareholders Equity:

Preferred stock, 10000 shares at $100 par $1,000,000
Common stock, 509,700 shares at $1 par $509,700*
Paid in capital-excess of par, preferred $100,000
Paid in capital-excess of par, common $558,800**
Retained earnings $1,029,150***
Treasury stock, at cost, 5000 shares (25,000)
Total shareholders equity $3,172,650

* (250,000-5,000) ×2(two in one stock split)

=490,000×1.03×$1=$504,700+$5000(treasury shares at $1)

=$509,700

**$500,000+[(490,000×3%) ×($5-$1) ]=$558,800

***$200,000-(100,000×$9) - [(250,000-5000) ×$1] - [(490,000×3%) ×$5] -(504,700×$.50) +$500,000

=$1,029,150

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