Peeler Company was incorporated as a new business on January 1, 2010. The corpor

Question

Peeler Company was incorporated as a new business on January 1, 2010. The corporate charter approved on that date authorized the issuance of 1,000 shares of $100 par, 7% cumulative, nonparticipating preferred stock and 10,000 shares of $5 par common stock. On January 10, Peeler issues for cash 500 shares of preferred stock at $120 per share and 4,000 shares of common stock at $80 per share. On January 20, it issued 1,000 shares of common stock to acquire a building site at a time when the stock was selling for $70 per share.

During 2010, Peeler established an employee benefit plan and acquired 500 shares of common stock at $60 per share as treasury stock for that purpose. Later in 2010, it resold 100 shares of the stock at $65 per share.

On December 31, 2010, Peeler determined its net income for the year to be $40,000. The firm declared the annual cash dividend to preferred stockholders and a cash dividend of $5 per share to the common stockholders. The dividends will be paid in 2011.

QUESTION:
Develop the Stockholder's Equity category of Peeler's balance sheet as of December 31, 2010. Indicate on the statement the number of shares authorized, issued, and outstanding for both preferred and common stock.

Explanation / Answer

Here are the journal entries: Cash............................$60,00… >>>>>Preferred Stock (500x$100)..........$50,000 >>>>>Preferred Stock............................$10,000 Cash (4,000 x $80)......... $320,000 >>>>>Common Stock (4,000x$80)........$20,000 >>>>>APIC- Common Stock.................$320,000 Building (1,000x$70).......$70,000 >>>>>Common Stock(1,000x$5)..........$5,000 >>>>>APIC- Common Stock................$65,000 Treasury Stock (500x$60)....$30,000 >>>>>Cash.............................… Cash (100x$65).......$6,500 >>>>>Treasury Stock.....................$6,000 >>>>>APIC- Treasury Stock...........$500 Here's what I think the Stockholder's Equity category looks like: Preferred Stock $100, 7% >>500 issued, 500 outstanding...........$50,000 Common Stock $5 >>5,000 issued, 5,000 outstanding.....$25,000 Additional Paid-In Capital...................$105,500 Retained Earnings.............................$40… ___________ TOTAL STOCKHOLDER'S EQUITY.....$220,500

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