Question

Tandy Company was issued a charter by the state of Indiana on January 15 of this year. The charter authorized the following: Common stock, $10 par value, 103,000 shares authorized Preferred stock, 9 percent, par value $8 per share, 4,000 shares authorized During the year, the following transactions took place in the order presented: Sold and issued 20,000 shares of common stock at $16 cash per share. Sold and issued 3,000 shares of preferred stock at $20 cash per share. At the end of the year, the accounts showed net income of $60,000. No dividends were declared.

Required: Prepare the stockholders' equity section of the balance sheet at the end of the year.

Answer 1

Answer:

Explanation:

The preparation of the  stockholders' equity section of the balance sheet is shown below:

Common stock, $10 par value,

103,000 shares authorized and 20,000

shares of common stock issued                    $200,000  (20,000 × $10)

Paid in capital in excess of par value $120,000      {20,000 shares × ($16 - $10)}

Preferred stock, 3000 shares issued at par       $24,000      (3,000 shares × $8)

Paid in capital in excess of par value $36,000     {3,000 shares × ($20 - $8)}

Retained earnings                               $60,000

Total                                                     $440,000