1. Analysis of stockholders\' equity Star Corporation issued both common and pre

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

a.   Compute the number of preferred shares that were issued during 20X6.
b.   Calculate the average issue price of the common stock sold in 20X6.
c.   By what amount did the company's paid-in capital increase during 20X6?
d.   Did Star's total legal capital increase or decrease during 20X6? By what amount?

Explanation / Answer

Star Corporation Stock Holders'Equity Section Details 20X6 20X5 Increase / (Decrease) No of shares issued Preferred Stock ,$100 par value,10%                     580,000                500,000                     80,000                          800 Common Stock,$10 par value                  2,350,000            1,750,000                  600,000                    60,000 Legal Capital(Considering par value)                  2,930,000            2,250,000                  680,000 Paid-in-capital in excess of par value Preferred shars                        24,000                           -                       24,000 Common shares                  4,620,000            3,600,000               1,020,000 Total Paid-in-capital in excess of par value                  4,644,000            3,600,000               1,044,000 Retained Earning                  8,470,000            6,920,000               1,550,000 Total Stockholder's Equity               16,044,000          12,770,000               3,274,000 a No of preference shares issued in 20X6= Additional par value/par value per share=80,000/100= 800 nos b Average issue price of common stock in 20X6 =( Additional par value+additional paid in)/(additional common stock issued in 2016)              =(600,000+1,020,000)/60,000= $                      27.00 Average issue price of common stock in 20X6 =$27 c Increase in paid in capital in 20X6 = $             1,044,000 d Legal Capital increase in 20X6 = $                 680,000

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