Question

Finishing Touches has two classes of stock authorized: 7%, $10 par preferred, and $1 par value common. The following transactions affect stockholders' equity during 2021, its first year of operations: January 2 Issues 100,000 shares of common stock for $24 per share. February 6 Issues 1,900 shares of 7% preferred stock for $13 per share. September 10 Purchases 12,000 shares of its own common stock for $29 per share. December 15 Resells 6,000 shares of treasury stock at $34 per share. In its first year of operations, Finishing Touches has net income of $149,000 and pays dividends at the end of the year of $94,000 ($1 per share) on all common shares outstanding and $1,330 on all preferred shares
Required:
Prepare the stockholders' equity section of the balance sheet for Finishing Touches as of December 31, 2018. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Answer:

Total Stockholders' Equity = $2,334,370

Explanation:

Note: See the attached excel file for the stockholders' equity section of the balance sheet for Finishing Touches as of December 31, 2018 with all the formulae used.

In the attached excel file, the retained earnings is calculated as follows:

Retained earnings = Net income – Common dividends - Preferred dividends = $149,000 - $94,000 - $1,330) = $53,670

From the attached excel file, we have:

Total Stockholders' Equity = $2,334,370

Download xlsx