Question

Johansson Corporation has issued 400,000 shares of $2 par value Ordinary shares. It authorized
600,000 shares. The share premium on ordinary shares is $500,000. The corporation has reacquired
20,000 shares at a cost of $80,000 and is currently holding those shares. Treasury stock was reissued
in prior years for $100,000 more than its cost. The company declared the issuance of a stock dividend
of 10,000 shares.
The corporation also has 5,000 shares issued and outstanding of 9%, $100 par value preference
shares. It authorized 10,000 shares. The share premium on preference shares is $100,000. Retained
earnings is $1,000,000.
Required: Prepare the stockholders’ equity section of the statement of financial position.

Answer 1

SOLUTION:

Johansson Corporation

Balance Sheet (partial)

                                                                                                                                                

Stockholders’ equity

          Paid-in capital

                   Capital stock

9% preferred stock, $100 par value,
                              10,000 shares authorized, 5,000
                              shares issued and outstanding.......................................    $ 500,000

                            Common stock, $2 par value, 600,000
                              shares authorized, 410,000 shares
                              issued, and 390000 shares outstanding..........................     820,000

                                     Total capital stock .................................................... 1320,000

                   Additional paid-in capital

                            In excess of par value—preferred stock............ $ 100,000

                            In excess of par value—common stock................ 500,000

                            From treasury stock............................................. 100,000

                                     Total additional paid-in capital.................................     700,000

                                     Total paid-in capital.................................................. 2,020,000

Retained earnings.......................................................1000000

Dividends declared in form of issuance of stock ........(100000)...........................900000

                                     Total paid-in-capital and
                                       retained earnings..................................................      2920000

Less: Treasury stock—common
                (20000 shares) (at cost) ........................................................      (80000)

                                     Total stockholders’ equity........................................    $2840000