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In: Accounting

Top of the World, Ltd. reported the following summarized balance sheet at December 31, 2010: Assets:...

  1. Top of the World, Ltd. reported the following summarized balance sheet at December 31, 2010:

Assets:

  Current assets

$11,600

  Property and equipment, net

35,000

Total assets

$46,600

Liabilities:

Liabilities

$23,000

Stockholders’ equity:

    Common stock, $0.10 par (25,000 shares issued and outstanding)

2,500

    

    Preferred stock, $20 par (100 shares issued and outstanding)

2,000

    Paid-in capital in excess of par

7,800

    

Retained earnings

11,300

Total liabilities and equity

$46,600

During 2011, Top of the World, Ltd. completed these transactions that affected stockholders’ equity:

January 15

Issued 5,000 shares of common stock for $15 per share.

February 1

Issue 250 shares of preferred stock for $23 per share.

June 1

Declared a cash dividend of $2 per preferred share and $0.50 per common share.

June 30

Paid the cash dividend.

October 1

Reacquired 3,000 shares of common stock as treasury stock, paying $13 per share.  

Taking into account the transactions above, prepare a statement of stockholders’ equity for Top of the World for the period ended December 31, 2011.  Use the format used in lecture and provided in your text, Illustration 10-20.   Assume net income for 2011 was $6,730.

Solutions

Expert Solution

Date Account Tittle Debit Credit
15-Jan Cash (5000 X15) $75,000.00
Common Stock (5000X$0.10) $500.00
Paid in Capital Excess of Par $74,500.00
To Record Issuance of Stock
1-Feb Cash (250 X23) $5,750.00
Preferred Stock (250X$20) $5,000.00
Paid in Capital in Excess of Par $750.00
To Record Issuance of Stock
1-Jun Retained Earning $15,700.00
Dividend Payable ( 5000+25000)X0.50+(100+250)X2 $15,700.00
To Record Dividend Declared
30-Jun Dividend Payable $15,700.00
Cash $15,700.00
TO Record Cash Dividend Paid
1-Oct Treasury Stock(13X3000) $39,000.00
Cash $39,000.00
Statement showing Stockholder Equity
Common stock, par value $0.10;
issued 30000 and outstanding 27,000 shares $3,000
Preferred stock, par value $20
issued and outstanding 350 shares $7,000
Paid-in capital in excess of par value
(7800+74500+750)
$83,050
Total Paid in Capital $93,050
Retained earnings (11300+6730) $18,030
Less: Treasury Share -$39,000
Total Stock Holder Equity as on 31 Dec 2011 $72,080

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