Question

The following summaries for ¹Maryland Service, Inc., and ²Grapone, Co., provide the information needed to prepare the stockholders’ equity section of each company’s balance sheet. The two companies are independent.

1. Maryland is authorized to issue 44,000 shares of $1 par common stock. All the stock was issued at $11 per share. The company incurred net losses of $47,000 in 2009 and $15,000 in 2010. It earned net income of $32,000 in 2011 and $178,000 in 2012. The company declared no dividends during the four-year period.    

2. Grapone’s charter authorizes the issuance of 70,000 shares of 5%, $14 par preferred stock and 470,000 shares of no-par common stock. Grapone issued 1,400 shares of the preferred stock at $14 per share. It issued 130,000 shares of the common stock for $260,000. The company’s retained earnings balance at the beginning of 2012 was $60,000. Net income for 2012 was $98,000, and the company declared the specified preferred dividend for 2012. Preferred dividends for 2011 were in arrears.

Requirements:

1. For each company, prepare the stockholders’ equity section of its balance sheet at December 31, 2012. Show the computation of all amounts. Entries are not required.

Answer 1