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 $841,000 cash and issued 29,000 shares of common stock b. Issued 19,500 shares of preferred stock at $39 per share; collected in cash Net income for the year was $59,000; cash dividends declared and paid at year-end were $10,000 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 0 Total Stockholders' Equity

Answer 1

Answer: Please refer to Explanation

Explanation:

This is how the stockholders' equity section of the balance sheet at December 31 should look like,

STOCKHOLDERS'S EQUITY

Contributed Capital

Common Stock (29000 shares x $ 1 par) $29,000

Preferred Stock (19500 shares x $ 10 par) $195,000

Paid in Capital in excess of Common Stock at par ($841000 - $29000) $812,000

Paid in Capital in excess of Preferred Stock at par (19500 shares x ($39 - $10)) $565,500

Total Contributed Capital (sum of all of the above) $1,601,500

Retained Earnings ( $59,000 - $10,000) $49,000

Total Stockholder's Equity (Retained Earnings to contributed cap) $1,650,500

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