Tandy Company was issued a charter by the state of Indiana on January 15 of this year. The charter authorized the following: Common stock, $10 par value, 103,000 shares authorized Preferred stock, 9 percent, par value $8 per share, 4,000 shares authorized During the year, the following transactions took place in the order presented: Sold and issued 20,000 shares of common stock at $16 cash per share. Sold and issued 3,000 shares of preferred stock at $20 cash per share. At the end of the year, the accounts showed net income of $60,000. No dividends were declared.

Required: Prepare the stockholders' equity section of the balance sheet at the end of the year.

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Lady

Business

5 May, 19:46

Tandy Company was issued a charter by the state of Indiana on January 15 of this year. The charter authorized the following: Common stock, $10 par value, 103,000 shares authorized Preferred stock, 9 percent, par value $8 per share, 4,000 shares authorized During the year, the following transactions took place in the order presented: Sold and issued 20,000 shares of common stock at $16 cash per share. Sold and issued 3,000 shares of preferred stock at $20 cash per share. At the end of the year, the accounts showed net income of $60,000. No dividends were declared.

Required: Prepare the stockholders' equity section of the balance sheet at the end of the year.

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Zane · Answer 1

The preparation of the stockholders' equity section of the balance sheet is shown below:

Common stock, $10 par value,

103,000 shares authorized and 20,000

shares of common stock issued $200,000 (20,000 * $10)

Paid in capital in excess of par value $120,000 {20,000 shares * ($16 - $10) }

Preferred stock, 3000 shares issued at par $24,000 (3,000 shares * $8)

Paid in capital in excess of par value $36,000 {3,000 shares * ($20 - $8) }

Retained earnings $60,000

Total $440,000