Question

Task: Your close friend Leslie Lazier is the owner and operator of Lazier Tech, Inc., which was organized in 2017. The company’s accountant resigned suddenly in early 2018 without leaving a contact number and Leslie was left with several unanswered questions as it relates to the composition of the company’s paid in capital and the total stockholders’ equity. At December 31, 2017, the Lazier Tech reported the following extract from the company’s balance sheet.

Preferred stock, 6%, $40 par, 1,000,000 shares authorized, none issued	$   0
Common stock, $4 par, 600,000 shares authorized, 100,000 shares issued and outstanding	400,000
Paid-in capital in excess of par—common	120,000
Retained earnings	60,000

During 2018, the company completed the following selected transactions:

a. Issued for cash 25,000 shares of preferred stock at par value.

b. Issued for cash 40,000 shares of common stock at a price of $10 per share.

c. Net income for the year was $240,000, and the company declared no dividends.

As her friend, Leslie now seeks your advice.

REQUIRED:

1.      Prepare the Stockholders Equity Section of the company’s balance sheet at December 31, 2018 based on the information presented and include the following:

·         information on par values.

·         the number of shares authorized and issued where necessary

·          the sub total for the total paid in capital

·         total stockholders’ equity

Answer 1

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Paid In Capital:
Preferred shares, 6% $40 par, 100,000 shares authorized,	25,000*$40	$   1,000,000
25,000 shares issued and outstanding
Common shares, $4 Par, 600,000 shares authorized	140,000*$4	$       560,000
140,000 shares issued and outstanding
Sub Total		$   1,560,000
Add: Paid in capital, in excess of par- Common	Beginning+(40,000*$6)	$       360,000
Total Paid in Capital		$   1,920,000
Retained Earning ($60,000+$240,000)		$       300,000
Total Stockholder's Equity		$   2,220,000