Question

DEF Company incorporated on January 1, 2018 after receiving authorization to issue 5,000 shares of $100 par value preferred stock and 500,000 shares of $10 par value common, with the former having a 10% cumulative dividend feature. During fiscal 2018, the company engaged in the following equity transactions: January 1 Issued 500 shares of preferred stock for $120 each. January 1 Issued 10,000 shares of common stock for $25 each. June 30 Bought 1,000 shares of common stock for the treasury at $30 each. December 31 Declared the preferred stock dividend and a $1.00 per-share dividend on the common. DEF’s fiscal 2018 comprehensive income consisted of the following: sales revenue of $2,500,000, cost of goods sold of $1,600,000, operating expenses of $300,000, income taxes of $215,000, and $40,000 of other comprehensive income from a transaction not subject to income tax.

Required—Prepare in good form each of the following: DEF’s fiscal 2018 statement of stockholders’ equity.

Answer 1

Statement of Stake holder of Equity
Opening Balacne	-
ADD: Equity issue in cash at par (10000*10)	$      100,000.00
ADD: Paid in capital in excess of par (10000*15)	$      150,000.00
ADD: Net Income (W.No.1 )	$      420,000.00
Less : Cash Dividend (10000*1)	$        10,000.00
Less : Treasury Stock (1000*30)	$        30,000.00
Closing Balance of stake holder of equity	$      630,000.00
Working Note No.1
Calculation of Net Income
Sales (A)	$ 2,500,000.00
Add : Other Comprehensive income (B)	$        40,000.00
Less: Cost of Goods Sold ( C)	$ 1,600,000.00
Less: Operating Exp. (D)	$      300,000.00
Less: Income tax ( E)	$      215,000.00
Total Income	$      425,000.00
Less : Pref. Dividend( 500*100*10%)	$          5,000.00
Net Income for equity	$      420,000.00