Arnold Corporation has been authorized to issue 40,000 shares of $100 par value,

Question

Arnold Corporation has been authorized to issue 40,000 shares of $100 par value, 8%, noncumulative preferred stock and 2,000,000 shares of no-par common stock. The corporation assigned a $5 stated value to the common stock. At December 31, 2011, the ledger contained the following balances pertaining to stockholders' equity. Preferred Stock $240,000 Paid-in Capital in Excess of Par Value-Preferred 56,000 Common Stock 2,000,000 Paid-in Capital in Excess of Stated Value-Common 5,700,000 Treasury Stock-Common (1,000 shares) 22,000 Paid-in Capital from Treasury Stock 3,000 Retained Earnings 560,000 The preferred stock was issued for land having a fair market value of $296,000. All common stock issued was for cash. In November, 1,500 shares of common stock were purchased for the treasury at a per share cost of $22. In December, 500 shares of treasury stock were sold for $28 per share. No dividends were declared in 2011.

Explanation / Answer

1. Issuance of preferred stock for land. Dr Land $296,000. Cr Preferred Stock $240,000 Cr Paid-in Capital in Excess of Par Value-Preferred 56,000 2. Issuance of common stock for cash Dr Cash 7,700,000 Cr Paid-in Capital in Excess of Stated Value-Common 5,700,000 Cr Common Stock 2,000,000 3. Purchase of common treasury stock for cash. Dr Treasury Stock-Common 33,000 Cr Cash 33,000 4. Sale of treasury stock for cash. Dr Cash 14,000 Cr Treasury Stock-Common 11,000 Cr Paid-in Capital from Treasury Stock 3,000 Complete the stockholders' equity section at December 31, 2011 Capital stock: ...Preferred Stock, $100 par value, 8%, noncumulative 40,000 ..... shares authorized, 2,400 shares issued & outstanding .........$240,000 ...Common Stock, $5 stated value, 2,000,000 shares authorized, ..... 400,000 issued & outstanding .......... .......... .......... .......... 2,000,000 .......... .......... .......... .......... .......... .......... .......... .......... ....-------------- $2,240,000 Additional paid-in capital ...Paid-in Capital in Excess of Par Value - Preferred .......... .......... 56,000 ...Paid-in Capital in Excess of Stated Value - Common ......... .. 5,700,000 ...Paid-in Capital from Treasury Stock .......... .......... .......... .......... 3,000 .......... .......... .......... .......... .......... .......... .......... .......... ....-------------- $5,759,000 .......... .......... .......... .......... .......... .......... .......... .......... .......... ......... --------------- Total paid-in capital .......... .......... .......... .......... .......... .......... .......... ..$7,999,000 Retained Earnings .......... .......... .......... .......... .......... .......... .......... ...... 560,000 .......... .......... .......... .......... .......... .......... .......... .......... .......... ......... --------------- .......... .......... .......... .......... .......... .......... .......... .......... .......... .........$8,559,000 less Treasury Stock-Common (1,000 shares), at cost .......... .......... ......... . ( 22,000) .......... .......... .......... .......... .......... .......... .......... .......... .......... ......... --------------- Total stockholders' equity .......... .......... .......... .......... .......... .......... ....$8,537,000 .......... .......... .......... .......... .......... .......... .......... .......... .......... ......... --------------

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