Davis Wright Systems Inc was formed in 2014. The company was authorized to issue

Question

Davis Wright Systems Inc was formed in 2014. The company was authorized to issue 5,000 shares of $100 par value, 8 percent cumulative preferred stock, and 100,000 shares of $2 stated value common stock.

Half of the preferred stock was issued at a price of $103 per share, and 70,000 shares of the common stock were sold for $13 pershare. At the end of 2014, Davis Wright had retained earnings of $382,100

A. Prepare the stockholders' equity section of Davis Wright's Balance Sheet as of December 31, 2014.

B. Assume that Davis Wright's common stock is trading at $24 pershare and its preferred stock is trading at $107 per share at the end of 2014. Would the stockholders' equity section prepared in part 'A' be affected by this additional information? Explain

Explanation / Answer

Answer:A

Answer:B

Stockholder's Equity Statement As on December 31,2014 Particulars Amount ($) Authorized Share: Common stock (100,000 share of $2 stated value) 200000 8% Cumulative preferred stock (5000 shares of $100 par value) 500000 Total authorized share 700000 Paid-in-capital Common stock (70,000 share of $2 stated value) 140000 8% preferred stock (2500*100) 250000 Paid in capital in excess ofpar-common (70000*11) 770000 Paid in capital in excess of par-preferred shares (2500*3) 7500 Total paid in capital 1167500 Retained earnings 382100 Total stockholder's Equity 1549600

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