Refer to the information provided in P10–2B.

Required:

Taking into consideration the beginning balances on January 1, 2021 and all the transactions during 2021, respond to the following for Nautical:

1. Prepare the stockholders’ equity section of the balance sheet as of December 31, 2021.

2. Prepare the statement of stockholders’ equity for the year ended December 31, 2021.

3. Explain how requirements 1 and 2 are similar and how they are different.

P10-2B

Nautical has two classes of stock authorized: $10 par preferred, and $1 par value common. As of the beginning of 2021, 125 shares of preferred stock and 3,000 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2021:

March 1 Issue 3,000 additional shares of common stock for $10 per share.

April 1 Issue 175 additional shares of preferred stock for $40 per share.

June 1 Declare a cash dividend on both common and preferred stock of $0.25 per share to all stockholders of record on June 15.

June 30 Pay the cash dividends declared on June 1.

August 1 Purchase 175 shares of common treasury stock for $7 per share.

October 1 Resell 125 shares of treasury stock purchased on August 1 for $9 per share.

Nautical has the following beginning balances in its stockholders’ equity accounts on January 1, 2021: Preferred Stock, $1,250; Common Stock, $3,000; Additional Paid-in Capital, $19,500; and Retained Earnings, $11,500. Net income for the year ended December 31, 2021, is $7,650.