Question

7-2

Sweet Sixteen has two classes of stock authorized: $100 par value preferred and $1 par value common. Sweet Sixteen has the following beginning balances in its stockholders' equity accounts on January 1, 2018: preferred stock, $100,000, common stock, $20,000; paid-in capital, $380,000; and retained earnings, $450,000. Net income for the year ended December 31, 2018, is $65,000. The following transactions affect stockholders' equity during 2018:

March 1 Issue 3,000 additional shares of common stock for $22 per share.
April 1 Issue 5,000 additional shares of preferred stock for $110 per share.
June 1 Declare a cash dividend on common stock of $1 per share and a cash dividend on preferred stock of $5 per share to all stockholders of record on June 15.
June 30 Pay the cash dividends declared on June 1.
August 1 Purchase 2,000 shares of common treasury stock for $18 per share.
October 1 Reissue 1,000 shares of treasury stock purchased on August 1 for $20 per share.

Taking into consideration the beginning balances and all the transactions during 2018, respond to the following for Sweet Sixteen:

Required:

2. 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.)

Answer 1

2. 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.)
Sweet Sixteen
Statement of Stockholders' Equity
For the Year Ended December 31, 2018
			Additional			Total
	Preferred	Common	Paid-in	Retained	Treasury	Stockholders'
	Stock	Stock	Capital	Earnings	Stock	Equity
Balance, January 1	$100,000	$20,000	$380,000	$450,000	$0	$950,000
Issued common stock (3000 x $1), (3000 x ($22 - $1)		$3,000	$63,000			$66,000
Purchase of treasury stock (2000 x $18)					-$36,000	-$36,000
Sale of treasury stock (1000 x ($20-$18);(1000 x $18)			$2,000		$18,000	$20,000
Issued preferred stock (5000 x $100); (5000 x( $110 -$100))	$500,000		$50,000			$550,000
Cash dividends (23000 x $1) common + (6000 x $5) preferred				-$53,000		-$53,000
Net income				$9,500		$9,500
Balance, December 31	$600,000	$23,000	$495,000	$406,500	-$18,000	$1,506,500
Sweet Sixteen
Balance Sheet
Stockholders’ equity
For the Year Ended December 31, 2018
Stockholders’ equity:
Common Stock	$23,000.00
Preferred Stock	$600,000.00
Additional paid-in capital	$495,000
Total paid-in capital	$1,118,000.00
Retained earnings	$406,500
Treasury stock, 200 shares	-$18,000
??Total Shareholder's Equity	$1,506,500.00