Question

Worldwide Company obtained a charter from the state in January that authorized 200,000 shares of common stock, $10 par value. During the first year, the company earned $38,200, declared no dividends, and the following selected transactions occurred in the order given: Issued 60,000 shares of the common stock at $12 cash per share. Reacquired 2,000 shares at $15 cash per share from stockholders; the shares are now held in treasury. Reissued 1,000 of the shares in transaction (b) two months later at $18 cash per share. 3. Prepare the stockholders’ equity section of the balance sheet at December 31. TIP: Because this is the first year of operations, Retained Earnings has a zero balance at the beginning of the year. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Answer and Explanation:

The preparation of stockholders’ equity section is shown below:-

                              Worldwide Company

                 Statement of stockholder equity

                                   31 December

                                   Paid-in-capital

Common stock - $10 par, 200,000 shares authorized

60,000 shares issued and outstanding                            $600,000

Paid in capital in excess of par - common                         $120,000

(60,000 × $12) - (60,000 × $10)

Paid in capital from treasury stock                                     $3,000

(1,000 × $18) - (1,000 × $15)

Total paid in capital                                                              $717,000

Retained earning                                                                  $38,200

Sub total                                                                                 $755,200

Less: Treasury stock at cost                                                 $15,000

(1,000 × $15)

Total stockholder equity                                                       $740,200

Therefore from above the stockholders’ equity is prepared.