1. 11-4 Reporting the Stockholders\' Equity Section of the Balance Sheet [LO2, L
ID: 2373818 • Letter: 1
Question
1. 11-4 Reporting the Stockholders' Equity Section of the Balance Sheet [LO2, LO3, LO4]
Shelby Corporation was organized in January 2010 by 10 stockholders to operate an air conditioning sales and service business. The charter issued by the state authorized the following capital stock:
The 2008 annual report for Fortune Brands, the seller of Pinnacle golf balls and MasterLock padlocks,disclosed that 750 million shares of common stock have been authorized. At the end of 2007, 235 million shares had been issued and the number of shares in treasury stock was 81 million. During 2008, 1 million common shares were reissued from treasury, and 5 million common shares were purchased for treasury stock.
Shelby Corporation was organized in January 2010 by 10 stockholders to operate an air conditioning sales and service business. The charter issued by the state authorized the following capital stock:
Explanation / Answer
a.) Collected $340,000 cash from each of the 10 organizers and issued 2,500 shares of common stock to each of them.
Dr Cash 3,400,000 ($340,000 x 10 organizers)
Cr Common stock 75,000 (2,500 shares x 10 organizers x $3 par value)
Cr Additional paid-in capital, common stock 3,325,000
b.) Issued 17,500 shares of preferred stock at $25 per share; collected in cash.
Dr Cash 437,500
Cr Preferred stock 227,500 (17,500 shares x $13 par value)
Cr Additional paid-in capital, preferred stock 210,000
Stockholders' equity section of the balance sheet at December 31, 2010
Contributed capital:
Preferred stock - $13 par value, 8 percent, authorized 49,000 shares;
..issued 17,500 shares $227,500
Additional paid-in capital, preferred stock $210,000
Common stock - $3 par value, authorized 200,000 shares;
..issued 25,000 shares $75,000
Additional paid-in capital, common stock $3,325,000
Total contributed capital $3,737,500
Retained earnings $37,800
Total stockholders' equity $3,875,300
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