Unifying Concepts: Stockholders’ Equity Icon Corporation was organized during 20
ID: 2589489 • Letter: U
Question
Unifying Concepts: Stockholders’ Equity
Icon Corporation was organized during 2010. At the end of 2011, the equity section of its balance
sheet appeared as follows:
Contributed capital:
Preferred stock (6%, $20 par, 10,000 shares authorized,
5,000 shares issued and outstanding). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $100,000
Common stock ($10 par, 50,000 shares authorized,
11,000 shares issued, 10,000 outstanding) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110,000
Paid-in capital in excess of par, preferred stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Total contributed capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $230,000
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100,000
Total contributed capital plus retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . $330,000
Less treasury stock (1,000 shares of common at cost) . . . . . . . . . . . . . . . . . . . . . . . . (12,000)
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $318,000
During 2012, the following stockholders’ equity transactions occurred (in chronological sequence):
a. Issued 500 shares of common stock at $13 per share.
b. Reissued 500 shares of treasury stock at $13 per share.
c. Issued 1,000 shares of preferred stock at $25 per share.
d. Reissued 500 shares of treasury stock at $10 per share.
e. Declared a dividend large enough to meet the current-dividend preference of the preferred
stock and to pay the common stockholders $2 per share. Dividends are recorded
directly in the retained earnings account.
f. Closed net income of $65,000 to Retained Earnings. Revenues were $400,000; expenses were $335,000.
Required:
1. Journalize the transactions.
2. Prepare the stockholders’ equity section of the balance sheet at December 31, 2012.
Explanation / Answer
Solution:
1) Preparing the Journal Entries for the Above Transactions:
2) Preparing the Stockholder's Equity Section of the Balance Sheet at December 31, 2012:
Icon Corporation
Partial Balance Sheet
December 31, 2012
Event General Journal Debit Credit a Cash $6,500 Common Stock $5,000 Paid-In Capital in Excess of Par, Common Stock $1,500 (Issued 500 shares of common stock at $13) b Cash $6,500 Treasury Stock $6,000 Paid-In Capital, Treasury Stock $500 (Reissued 500 Shares of Treasury Stock at $13 Per Share, Cost was $12 Per Share) c Cash $25,000 Preferred Stock $20,000 Paid-In Capital in Excess of Par, Preferred Stock $5,000 (Issued 1,000 shares of preferred stock at $25 Per Share) d Cash $5,000 Paid-In Capital, Treasury Stock $500 Retained Earnings $500 Treasury Stock $6,000 (Reissued 500 shares of treasury stock at $10 Per Share, Cost was $12 Per Share) e Retained Earnings $30,200 Dividends Payable $30,200 [Declared Dividends to Common and Preferred Stockholders, Preferred: ($100,000 + $20,000) * 6% = $7,200, Common: (10,000 Shares + 500 New Shares issued + 1,000 Treasury Shares Reissued * $2 = $23,000)] f Revenues $400,000 Retianed Earnings $65,000 Expenses $335,000 (Closed Net Income and Retained Earnings)Related Questions
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