North Wind Aviation received its charter during January authorizing the followin

Question

North Wind Aviation received its charter during January authorizing the following capital stock Preferred stock: 8 percent, par $10, authorized 20,000 shares Common stock: par $1, authorized 60,000 shares. The followving transactions occurred during the first year of operations in the order given a Issued a total of 49,000 shares of the common stock for $11 per share b. Issued 10,000 shares of the preferred stock at $12 per share c. Issued 3,900 shares of the common stock at $16 per share and 1,000 shares of the preferred stock at $12 d. Net income for the first year was $57 000 Required: Prepare the stockholders equity section of the balance sheet at December 31 NORTH WIND AVIATION Balance Sheet (Partial) At December 31 Stockholders' Equity

Explanation / Answer

SOLUTION

Stockholders' Equity section at December 31

Additional paid in capital, preffered

= [10,000 shares * ($12 - $10)] + [1,000 shares * ($12 - $10)]

= (10,000 shares * $2) + (1,000 shares * $2)

= $20,000 + $2,000 = $22,000

Additional paid in capital, common stock

= [49,000 shares * ($11 - $1)] + [3,900 shares * ($16 - $1)]

= (49,000 shares * $10) + (3,900 shares * $15)

= $490,000 + $58,500 = $548,500

Amount ($) Amount ($) Contributed Capital: Preferred stock (10,000+1,000)*$10 110,000 Additional paid in capital, preferred 22,000 Common stock (49,000+3,900)*$1 52,900 Additional paid in capital, common stock 548,500 Total contributed capital 733,400 Retaned Earnings: Net Income 57,000 Total stockholder's Equity 790,400

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