1. Analysis of stockholders\' equity Star Corporation issued both common and pre
ID: 2444799 • Letter: 1
Question
1. Analysis of stockholders' equity
Star Corporation issued both common and preferred stock during 20X6. The stockholders' equity sections of the company's balance sheets at the end of 20X6 and 20X5 follow:
20X6
20X5
Preferred stock, $100 par value, 10%
$580,000
$500,000
Common stock, $10 par value
2,350,000
1,750,000
Paid-in capital in excess of par value
Preferred
24,000
—
Common
4,620,000
3,600,000
Retained earnings
8,470,000
6,920,000
Total stockholders' equity
$16,044,000
$12,770,000
Compute the number of preferred shares that were issued during 20X6.
Calculate the average issue price of the common stock sold in 20X6.
By what amount did the company's paid-in capital increase during 20X6?
Did Star's total legal capital increase or decrease during 20X6? By what amount?
20X6
20X5
Preferred stock, $100 par value, 10%
$580,000
$500,000
Common stock, $10 par value
2,350,000
1,750,000
Paid-in capital in excess of par value
Preferred
24,000
—
Common
4,620,000
3,600,000
Retained earnings
8,470,000
6,920,000
Total stockholders' equity
$16,044,000
$12,770,000
Explanation / Answer
Answer:
Number of preferred shares that were issued during 20X6= Change in total par value of preferred stock
Par value per share of preferred stock
= 580,000 - 500,000
100
= 800 shares
Average issue price of the common stock sold in 20X6 = Change in total capital of common stock
Change in number of shares
= 4,620,000 + 2,350,000 - 3,600,000 - 1,750,000
(2,350,000 - 1,750,000 /10)
= $27 per share
Company's paid-in capital increase during 20X6 = Total paid-in capital in 20X6 - Total paid-in capital in 20X5
= 580,000 + 23,50,000+ 24,000+ 4,620,000-1,750,000-3,600,000-500,000
= $1,724,000
Change in legal capital of Star = Total legal capital in 20X6 - Total legal capital in 20X5
= 2,350,000 +580,000 - 1,750,000 - 500,000
= $680,000
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.