Business College

Inside Incorporated was issued a charter on January 15 authorizing the following capital stock:
Common stock, $6 par, 100,000 shares, one vote per share
Preferred stock, 7 percent, par value $10 per share, 5,000 shares, nonvoting.
The following selected transactions were completed during the first year of operations in the order given:
a. Issued 21,000 shares of the $6 par common stock at $19 cash per share.
b. Issued 3,100 shares of preferred stock at $23 cash per share.
c. At the end of the year, the accounts showed net income of $39,000
Prepare the stockholders' equity section of the balance sheet at December 31

Answers

Answer 1

Answer:

Total stockholders' equity = $509,300

Explanation:

Before the stockholders' equity section of the balance sheet is prepared, the following are calculated first:

Common stock = Number of common shares issued * Par value of common share = 21,000 * $6 = $126,000

Additional-paid-in-capital (APIC) – Common stock = Number of common shares issued * (Common stock cash per share - Par value of common share) = 21,000 * ($19 - $6) = $273,000

Preferred stock = Number of preferred stock issued * Par value of preferred stock = 3,100 * $10 = 31,000

APIC – Preferred stock = Number of preferred stock issued * (Preferred stock cash per share - Par value of preferred stock) = 3,100 * ($23 - $10) = $40,000

Therefore, the stockholders' equity section of the balance sheet at December 31 can now be prepared as follows:

Inside Incorporated

Balance Sheet (Partial)

At December 31

Details                                                              $

Stockholders' equity:

Common stock                                         126,000

APIC – Common stock                            273,000

Preferred stock                                          31,000

APIC – Preferred stock                             40,000    

Net income                                                39,000    

Total stockholders' equity                     509,300  

Related Questions

Straight-Line Depreciation A building acquired at the beginning of the year at a cost of $2,200,000 has an estimated residual value of $400,000 and an estimated useful life of 20 years. Determine the following: (a) The depreciable cost $fill in the blank 1 (b) The straight-line rate fill in the blank 2 % (c) The annual straight-line depreciation $fill in the blank 3

Answers

Answer:

a)

Depreciable Cost = $ 1800000

b)

Straight Line Depreciation Rate = 5%

c)

Depreciation expense per year = $90000

Explanation:

a)

The depreciable cost is the cost that qualifies for depreciation. It is calculated as,

Depreciable Cost = Cost - Salvage Value

Depreciable Cost = 2200000 - 400000

Depreciable Cost = $ 1800000

b)

The straight line depreciation method charges a constant depreciation expense every period. The rate of straight line depreciation can be calculated as follows,

Straight Line Depreciation Rate = Depreciable cost percentage / Estimated useful life

Straight Line Depreciation Rate =  100% / 20

Straight Line Depreciation Rate = 5%

c)

The annual straight line depreciation expense can be calculated as follows,

Depreciation expense per year = Depreciable cost * Straight line depreciation rate

Depreciation expense per year = 1800000 * 0.05

Depreciation expense per year = $90000

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