Question

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.

Answer 1

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