Question

Tandy Company was issued a charter by the state of Indiana on January 15 of this year. The charter authorized the following:

     Common stock, $6 par value, 107,000 shares authorized

     Preferred stock, 15 percent, par value $13 per share, 5,100 shares authorized

During the year, the following transactions took place in the order presented:

a. Sold and issued 21,300 shares of common stock at $26 cash per share.

b. Sold and issued 2,300 shares of preferred stock at $30 cash per share.

c. At the end of the year, the accounts showed net income of $41,100. No dividends were declared.

Required:

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

Answer 1

Tandy Company
Stockholders' Equity
December 31
Paid-In Capital:
15% Preferred stock, $13 par value, 5,100 shares authorized; 2,300 shares issued and outstanding	$     29,900
Common stock, $6 par value, 107,000 shares authorized; 21,300 shares issued and outstanding	$   127,800
Paid-In Capital in Excess of Par—Preferred Stock	$     39,100
Paid-In Capital in Excess of Par—Common Stock	$   426,000
Total Paid-In Capital		$   622,800
Retained Earnings		$     41,100
Total Stockholders' Equity		$   663,900

Journal entries
Event	General journal	Debit	Credit
a	Cash (21300*26)	$       553,800
	Paid in capital excess of par value - common stock (21300*(26-6))		$       426,000
	Common stock (21300*6)		$       127,800
	(To record issue of common stock.)
b	Cash (2300*30)	$          69,000
	Paid in capital excess of par value - Preferred stock (2300*(30-13))		$         39,100
	Preferred stock (2300*13)		$         29,900
	(To record issue of preferred stock.)
c	Income summary	$          41,100
	Retained earnings		$         41,100
	(To record closed the net income.)