Question

Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2018, 200 shares of preferred stock and 2,800 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2018:

March 1 Issue 1,000 shares of common stock for $30 per share.

May 15 Purchase 600 shares of treasury stock for $23 per share.

July 10 Reissue 100 shares of treasury stock purchased on May 15 for $28 per share.

October 15 Issue 100 shares of preferred stock for $33 per share.

December 1 Declare a cash dividend on both common and preferred stock of $0.85 per share to all stockholders of record on December 15. (Hint: Dividends are not paid on treasury stock.)

December 31 Pay the cash dividends declared on December 1.

Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2018: Preferred Stock, $200; Common Stock, $28; Additional Paid-in Capital, $64,000; and Retained Earnings, $24,500. Net income for the year ended December 31, 2018, is $9,600.

Taking into consideration the beginning balances on January 1, 2018 and all the transactions during 2018, respond to the following for Donnie Hilfiger:

Required:

1. 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.)

DONNIE HILFIGER
Balance Sheet
(Stockholders' Equity Section)
December 31, 2018
Stockholders' equity:
Total paid-in capital
Total stockholders' equity

2. Prepare the statement of stockholders’ equity for the year ended December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.)

DONNIE HILFIGER
Statement of Stockholders' Equity
For the Year Ended December 31, 2018
	Preferred Stock	Common Stock	Additional Paid-in Capital	Retained Earnings	Treasury Stock	Total Stockholders' Equity
Balance, January 1
Issue of common stock
Purchase of treasury stock
Sale of treasury stock
Issued preferred stock
Dividends
Net income
Balance, December 31

Answer 1

Date	Account	Debit	Credit
Mar 1	Cash (1000*30)	30000
	Common Stock (1000*0.01)		10
	Paid-in Capital in Excess of Par Value--Common (1000*(30-0.01)		29990
	(Issue 1,000 shares of common stock for $30 per share)
Mar 15	Treasury Stock 600*23	13800
	Cash		13800
	(purcahse of treasury stock)
Jul 10	Cash 100*28	2800
	Treasury Stock 100*23		2300
	Paid-in Capital on Sale of Treasury Stock		500
	(reissue of treasury stock)
Oct15	Cash 100*33	3300
	Preferred Stock 100*1		100
	Paid-in Capital in Excess of Par Value--Preferred		3200
	(issue preferred stock at 33)
Dec 1	Retained Earning 0.85*(200+100+28+10)	287.3
	Dividend Payable		287.3
Dec 13	Dividend Payable	287.3
	Cash		287.3
	1. Stock holder equity section
	Stockholder Equity:
	Preferred Stock, 1 par value (200+100)		300
	Common Stock, 0.01 par value		38
	Paid-in Capital		97190
	(64000+29990+3200)
	Retained Earning (24500+9600-287.3)		33813
	Treasury Stock		-11500
	Paid in Capital-Treasury Stock		500
	Total		120341
	2. Stockholder Equity
		Preferred Stock	Common Stock	Additional Paid in capital	Retained Earnings	Treasury Stock	Total Equity
	Balance, beginning	200	28	64000	24500	0	88728
	Issue of common stock		10	29990			30000
	Purchase of treasury stock					-13800	-13800
	Sale of treasury stock			500		2300	2800
	Issue preferred stock	100		3200			3300
	Dividends				-287.3		-287.3
	Net Income				9600		9600
	Balance, ending	300	38	97690	33813	-11500	120341