Question

In Draco Corporation’s first year of business, the following transactions affected its equity accounts. Issued 6,800 shares of $2 par value common stock for $46. It authorized 20,000 shares. Issued 1,700 shares of 12%, $10 par value preferred stock for $51. It authorized 3,000 shares. Reacquired 340 shares of common stock for $58 each. Retained earnings is impacted by reported net income of $78,000 and cash dividends of $29,000. Prepare the stockholders’ equity section of Draco’s balance sheet as of December 31.

Answer 1

Answer:

$428,780

Explanation:

DRACO CORPORATION

Stockholders' Equity Section of the Balance Sheet as at December 31

Preferred stock- $10 par value

($6,800×$2) $13,600

Paid in capital in excess of par- Preferred stock ($6,800 ×$44) $299,200

($46-$2)

Preferred stock- $10 par value

($1,700×$10) $17,000

Paid in capital in excess of par- Common stock ($1,700×$41) $69,700

($51-$10)

Retained earnings($78,000-$29,000) $49,000

Less: Treasury stock($340×$58) ($19,720)

Total stockholders' equity $428,780

($448,500-$19,720)

Answer 2

The stockholders’ equity section of Draco’s balance sheet as of December 31 is $428,780.

• Preferred stock = $6800 × 2 = $13600
• Add: Paid on capital = ($6800 × 44) = $299200
• Add preferred stock par value = ($1700 × 10) = $17000

• Add: Paid in capital excess of par = $1700 × $41 = $69700
• Add: Retained earnings = $78000 - $29000 = $49000
• Less: Treasury stock = $340 × $58 = $19720

• Total stockholders equity = $428780

Therefore, the stockholders equity is $428780.

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