Question

When Resisto Systems, Inc., was formed, the company was authorized to issue 5,000 shares of $100 par value, 8 percent cumulative preferred stock, and 100,000 shares of $2 stated value common stock. Half of the preferred stock was issued at a price of $105 per share, and 60,000 shares of the common stock were sold for $11 per share. At the end of the current year, Resisto has retained earnings of $382,000. a. Prepare the stockholders’ equity section of the company’s balance sheet at the end of the current year.

Answer 1

Answer:

                               Resisto Systems

              Stockholder Equity As on MM DD, YYYY

Common Share paid-in Capital                                   $120,000

Preferred Shares paid-in Capital                                 $250,000

Additional paid-in capital above par Common           $540,000

Additional paid-in capital above par Preferred           $12,500

Retained Earning                                                          $382,000  

Total Stockholder Equity                                              $1,304,500

Explanation:

The stockholders' equity section is reported on the Equity and Liabilities section of the balance sheet. Equity and Liabilities section are equal to the total assets value on the balance sheet. The Stockholders Equity section is  consists of the capital from common and preferred shares and any additional paid-in capital over par value. Retained earnings is also a part of this section. The retained earnings is the net balance of opening retained earnings, net income earned during the period and dividends paid during the period.

Preferred share issued = 5,000 x 0.5 = 2,500

Common Share paid-in Capital = 60,000 x $2 = $120,000

Preferred Shares paid-in Capital = 2500 x $100 = $250,000

Additional paid-in capital above par Common = ( $11 - $2 ) x 60,000 = $540,000

Additional paid-in capital above par Preferred = ( $105 - $100 ) x 2,500 = $12,500