Flannagan Corporation is authorized to issue 1,000 shares of 9% preferred stock

ID: 2586082 • Letter: F

Question

Flannagan Corporation is authorized to issue 1,000 shares of 9% preferred stock at a par value of $20 per share and 50,000 shares of common stock with a par value of $2 per share. Flannagan Corporation issued 200 shares of preferred stock at $22 per share and 20,000 shares of common stock for $2.50 per share.

What does the balance sheet look like after the stock is issued? To answer this question, fill in the partial balance sheet that follows.

Flannagan Corporation
Balance Sheet (Partial)
December 31, 2013 Stockholders' equity: Preferred 9% stock, $20 par, 1,000 shares authorized shares issues and outstanding $ Common stock, $2 par, 50,000 shares authorized, shares issues and outstanding Additional paid-in capital: Preferred stock $ Common stock Total capital stock $

Explanation / Answer

Total capital stock

Note:-

(1.) Preferred stock has been issued at premium, hence difference of $(22-20) = 2 will be reported as premium on stock and will be reduced from retianed earnings.

Premium on stock $(200*2) = 400 (DR.)

Retained earnings $(200*2) = 400 (CR.)

(2.) Common stock has been issued at premium, hence difference of $(2.5-2) = 0.5 will be reported as premium on stock and will be reduced from retianed earnings.

Premium on stock $(20,000*0.5) = 10,000 (DR.)

Retained earnings $(200*2) = 10,000 (CR.)

$ 44,000 = (44,000) (a +b)

lannagan Corporation
Balance Sheet (Partial)
December 31, 2013 Stockholders' equity: Preferred 9% stock, $20 par, 1,000 shares authorized shares issues and outstanding $ (1,000*20)=2,000 Common stock, $2 par, 50,000 shares authorized, shares issues and outstanding $(50,000*2)=1,00,000 Additional paid-in capital: Preferred stock $(200*20) = 4,000 (a) Common stock $(20,000*2) = 40,000 (b)