Question

Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2018, 200 shares of preferred stock and 3,600 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2018:

March 1 Issue 1,000 shares of common stock for $38 per share.

May 15 Purchase 600 shares of treasury stock for $31 per share.

July 10 Reissue 100 shares of treasury stock purchased on May 15 for $36 per share.

October 15 Issue 100 shares of preferred stock for $41 per share.

December 1 Declare a cash dividend on both common and preferred stock of $0.70 per share to all stockholders of record on December 15. (Hint: Dividends are not paid on treasury stock.)

December 31 Pay the cash dividends declared on December 1.

Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2018: Preferred Stock, $200; Common Stock, $36; Additional Paid-in Capital, $72,000; and Retained Earnings, $28,500. Net income for the year ended December 31, 2018, is $10,400.

Taking into consideration the beginning balances on January 1, 2018 and all the transactions during 2018, respond to the following for Donnie Hilfiger:

1. Prepare the stockholders’ equity section of the balance sheet as of December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.)

2. Prepare the statement of stockholders’ equity for the year ended December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Solution 1:

Donnie Hilfiger
Balance Sheet - Stockholder's Equity Section
31-Dec-18
Particulars	Amount
Stockholders Equity:
Common stock	$46.00
Preferred Stock	$300.00
Additional paid in capital	$114,490.00
Total Paid in capital	$114,836.00
Retained Earnings	$35,820.00
Treasury Stock	-$15,500.00
Total Stockholder's Equity	$135,156.00

Solution 2:

Donnie Hilfiger
Statement of Stockholder's Equity
For the year ended December 31, 2018
Particulars	Preferred Stock	Common Stock	Additional Paid in Capital	Retained Earnings	Treasury Stock	Total Stockholder's Equity
Balance, January 1	$200.00	$36.00	$72,000.00	$28,500.00	$0.00	$100,736.00
Issue of common stock		$10.00	$37,990.00			$38,000.00
Purchase of Treasury Stock					-$18,600.00	-$18,600.00
Sale of Treasury stock			$500.00		$3,100.00	$3,600.00
Issued Preferred stock	$100.00		$4,000.00			$4,100.00
Dividends				-$3,080.00		-$3,080.00
Net Income				$10,400.00		$10,400.00
Balance, December 31	$300.00	$46.00	$114,490.00	$35,820.00	-$15,500.00	$135,156.00