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27 May, 09:29

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

Common stock, $8 par value, 121,000 shares authorized

Preferred stock, 9 percent, par value $8 per share, 5,300 shares authorized

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

a. Sold and issued 21,400 shares of common stock at $12 cash per share.

b. Sold and issued 2,000 shares of preferred stock at $16 cash per share.

c. At the end of the year, the accounts showed net income of $41,000. No dividends were declared.

Required:

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

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Answers (1)
  1. 27 May, 10:26
    0
    Tandy Company

    Balance Sheet Equity Section

    Common Stock (21,400 x $8) $171,200

    Preferred Stock 9% ($2,000 x $8) $16,000

    Add-in-capital Excess of par Common stock $85,600

    ($12 - $8) x 21,400 shares

    . Add-in-capital Excess of par Common stock $16,000

    ($16 - $8) x 2,000 shares

    Retained Earning $41,000

    Total Equity $329,800

    Explanation:

    The par value and the add-in-capital which is excess from par of common and preferred shares are recorded separately.

    Net Income reported in the period will be transferred to the retained earning.
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