Shelby Corporation was organized in January to operate an air-conditioning sales

Question

Shelby Corporation was organized in January to operate an air-conditioning sales and service business. The charter issued by the state authorized the following capital stock Common stock, $1 par value, 200,000 shares. Preferred stock, $10 par value, 6 percent, 50,000 shares. During January and February, the following stock transactions were completed: a. Collected $441,000 cash and issued 21,000 shares of common stock. b. Issued 15,500 shares of preferred stock at $31 per share; collected in cash. Net income for the year was $51,000; cash dividends declared and paid at year-end were $11,000 Required: Prepare the stockholders' equity section of the balance sheet at December 31. SHELBY CORPORATION Balance Sheet (Partial) At December 31 Stockholders' Equity Contributed Capital: Total Contributed Capital Total Stockholders' Equity

Explanation / Answer

Stockholders' equity section will be prepared as follows:

S CORPORATION Balance Sheet (Partial) At December 31 Stockholders' Equity Contributed capital: Common stock (21,000 x $1) 21000 Preferred stock (15,500 x $10) 155000 Paid-in Capital in Excess of Par - Common Stock ($441,000 - $21,000) 420000 Paid-in Capital in Excess of Par - Preferred Stock [($31-$10) x 15,500] 325500 Total contributed capital 921500 Retained earnings ($51,000 - $11,000) 40000 Total stockholders' equity 961500

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