E11-5 Determining the Effects of the Issuance of Common and Preferred Stock [LO

Question

E11-5 Determining the Effects of the Issuance of Common and Preferred Stock [LO 11-2, LO 11-4] Inside Incorporated was issued a charter on January 15 authorizing the following capital stock: Common stock, $6 par, 100,000 shares, one vote per share Preferred stock, 7 percent, par value $10 per share, 5,000 shares, nonvoting. The following selected transactions were completed during the first year of operations in the order given: a. Issued 21,000 shares of the $6 par common stock at $19 cash per share. b. Issued 3,100 shares of preferred stock at $23 cash per share. c. At the end of the year, the accounts showed net income of $39,000 1. Prepare the stockholders' equity section of the balance sheet at December 31 INSIDE INCORPORATED Balance Sheet (Partial) At December 31 Stockholders' Equity Contributed Capital: $ 126,000 Common Stock Preferred Stock Additional Paid-in Capital, Common Stock Additional Paid-in Capital, Preferred Stock 126,000 39,000 Total Contributed Capital Retained Earnings Total Stockholders' Equity $ 165,000

Explanation / Answer

**Additional paid in capital includes amount received in excess of par value of the shares issued.

INSIDE INCORPORATED Balance Sheet (Partial) At December 31 Stockholders Equity Contributed Capital: Common Stock [21,000 shares x $6] $126,000 Preferred Stock [3,100 shares x $10] $31,000 Additional paid in Capital, Common Stock [21,000 shares x ($19 - $6)] $273,000 Additional paid in Capital, Preferred Stock [3,100 shares x ($23 - $10)] $40,300 Total contributed Capital $470,300 Retained Earnings $39,000 Total Stockholders Equity $509,300

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