E11-3 Preparing the Stockholders Equity Section of the Balance Sheet [LO 11-2, L

Question

E11-3 Preparing the Stockholders Equity Section of the Balance Sheet [LO 11-2, LO 11-4] North Wind Aviation received its charter during January authorizing the following capital stock Preferred stock: 8 percent, par $10, authorized 20,000 shares. Common stock: par $1, authorized 50,000 shares. The following transactions occurred during the first year of operations in the order given: a. Issued a total of 33,000 shares of the common stock for $13 per share b. Issued 12,000 shares of the preferred stock at $14 per share. c. Issued 2,300 shares of the common stock at $18 per share and 1,200 shares of the preferred stock at $14. d. Net income for the first year was $41,000 Required: Prepare the stockholders' equity section of the balance sheet at December 31 NORTH WIND AVIATION Balance Sheet (Partial) At December 31 Stockholders' Equity Contributed Capital: Total Contributed Capital Total Stockholders' Equity

Explanation / Answer

NORTH WIND AVIATION

Balance Sheet (Partial)

At December 31

Stockholders’ Equity

Contributed capital;

Preferred stock, $10 par value (13200 * $10)

$132000

Additional paid in capital – Preferred stock ($48000 + $4800)

$52800

Common stock, $1 par value (35300 * $1)

$35300

Additional paid in capital – Common stock ($396000 + $39100)

$435100

Total contributed capital

$655200

Retained earnings

$41000

Stockholders’ equity

$696200

Working Note;

1. Additional paid in capital on preferred stock is calculated as follow;

(12000 * $4) + (1200 * $4) = $52800

2. Additional paid in capital on common stock is calculated as follow;

(33000 * $12) + (2300 * $17) = $435100

NORTH WIND AVIATION

Balance Sheet (Partial)

At December 31

Stockholders’ Equity

Contributed capital;

Preferred stock, $10 par value (13200 * $10)

$132000

Additional paid in capital – Preferred stock ($48000 + $4800)

$52800

Common stock, $1 par value (35300 * $1)

$35300

Additional paid in capital – Common stock ($396000 + $39100)

$435100

Total contributed capital

$655200

Retained earnings

$41000

Stockholders’ equity

$696200

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