The stockholders\' equity section on the December 31 balance sheet of Chemfast C

Question

The stockholders' equity section on the December 31 balance sheet of Chemfast Corporation reported the following amounts: Contributed Capital Preferred Stock (par $20; authorized 10,000 shares, ? issued, of which 1,000 shares are held as treasury stock) $ 98,000 Additional Paid-in Capital, Preferred 12,740 Common Stock (no-par; authorized 20,000 shares, issued and outstanding 5,700 shares) 552,900 Retained Earnings 27,000 Treasury Stock, 1,000 Preferred shares at cost 9,350 Assume that no shares of treasury stock have been sold in the past. Required: Complete the following statements.

Explanation / Answer

1. Number of shares of preferred stock issued was 9000(10,000-1000).

2. Number of shares of preferred stock outstanding was 9000.

3. The average issue price of preferred stock was $59 per share.

=( ($98000/1000 treasury stock) + par value of $20 ) / 2

=($98+$20)/2

=$118/2

=$59 per share

4. The average issue price of the common stock was $97 per share.

=$552,900/5700 shares

=$97 per share

5. The treasury stock transaction increased (decreased) stockholders equity by $9350.

6. The treasury stock cost $9350/1000 shares= $9.35 per share.

7. Total stockholder’ equity is $681,290 ($98,000+$12740+$552,900+$27,000-$9350)

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