Question

Witt Corporation received its charter during January of this year. The charter authorized the following stock:

Preferred stock: 10 percent, $13 par value, 22,400 shares authorized

Common stock: $11 par value, 51,500 shares authorized

During the year, the following transactions occurred in the order given:

1. Issued 38,300 shares of the common stock for $15 per share.
2. Sold 5,900 shares of the preferred stock for $19 per share.
3. Sold 3,100 shares of the common stock for $18 per share and 1,400 shares of the preferred stock for $29 per share.
4. Net income for the year was $66,000.

Required:

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

Answer 1

Transaction a:

Common Stock = 38,300 * $11
Common Stock = $421,300

Additional Paid-in Capital, Common Stock = 38,300 * ($15 - $11)
Additional Paid-in Capital, Common Stock = $153,200

Transaction b:

Preferred Stock = 5,900 * $13
Preferred Stock = $76,700

Additional Paid-in Capital, Preferred Stock = 5,900 * ($19 - $13)
Additional Paid-in Capital, Preferred Stock = $35,400

Transaction c:

Common Stock = 3,100 * $11
Common Stock = $34,100

Additional Paid-in Capital, Common Stock = 3,100 * ($18 - $11)
Additional Paid-in Capital, Common Stock = $21,700

Preferred Stock = 1,400 * $13
Preferred Stock = $18,200

Additional Paid-in Capital, Preferred Stock = 1,400 * ($29 - $13)
Additional Paid-in Capital, Preferred Stock = $22,400

Transaction d:

Retained Earnings = Net Income
Retained Earnings = $66,000