#2 Question From the following information, prepare the Stockholders' Equity section of the Balance Sheet for the year ended December 31, Year 6. (Show all work and computations!) 1. Preferred Stock-Cumulative. $100 par, 7%, authorized 2,500 shares and issued 600 shares which were sold at 103% of par on January 1, Year 1. 2. Preferred Stock-Cumulative and participating, $100 par, 8%, authorized 1,800 shares and issued 800 shares which were sold at 105% of par on January 1, Year 6. 3. Preferred Stock-Non-Cumulative, $100 par, 6%, authorized 2,000 shares and issued 900 shares which were sold at 102% of par on January 1, Year 6. 4. Common Stock-$10 par value, 300,000 shares were authorized and 200,000 shares were issued at a market price of $25 per share on January 1, Year 6. 5. Common Stock Subscribed-15,000 shares at a market price of $35 per share on December 15, Year 6 6. Treasury Stock-the company purchased 6,000 shares for $180,000 on May 15, Year 6, and then later re-issued 4,000 of these shares for $160,000 on August 1, Year 6. 7. $160,000 was appropriated for plant expansion on December 31, Year 6. 8. Retained Earnings as of January 1, Year 6 was $6,000,000. In Year 6, the company lost $90,000. 9. Dividends Declared: a) Cash dividend declared on the preferred stock The required preferred dividend on both the cumulative and non cumulative plus 3 years dividends in arrears on the cumulative preferred. b) Stock dividend declared on the common stock The company declared a 10% stock dividend on December 24, Year 6, to be issued on January 22, Year 7. The market price of the common stock at the time the dividend was declared was $50. c) Cash dividend declared on the common stock A $1.50 dividend per share on the common stock plus the stock subscribed. In addition, these shares received a "bonus" dividend of $0.25 per share. d) Cash dividend declared on the participating preferred The required preferred dividend on the cumulative participating, plus a $0.25 "bonus" dividend. Problem Unsolved Solution steps required STOCKHOLDERS EQUITY SECTION OF THE BALANCE SHEET par value, shares authorized, Preferred Stock, Preferred Stock, par value, shares authorized, Preferred Stock, par value, shares authorized, Premium on Preferred Stock % cumulative and non-participating. shares issued and outstanding % cumulative and participating. shares issued and outstanding % non-cumulative and non-participating. shares issued and outstanding TOTAL CONTRIBUTED BY PREFERRED STOCKHOLDERS: (Par Value), shares issued, of which Common Stock, Common Stock Subscribed, shares authorized are held in Treasury shares Common Stock Dividend to be Distributed shares Problem #2 Solution Sheet SUB TOTAL ADDITIONAL PAID-IN CAPITAL Premium on Common Stock Paid in Capital Excess of Par: Common Stock Subscribed Paid in Capital from Stock Dividends Paid in Capital from Treasury Stock Transactions TOTAL ADDITIONAL PAID IN CAPITAL TOTAL PAID IN CAPITAL Retained Earnings Appropriated for Plant Expansion Restricted by the purchase of Treasury Stock Free and Unappropriated TOTAL RETAINED EARNINGS Total Paid in Capital and Retained Earnings Less Cost of Treasury Stock TOTAL STOCKHOLDERS' EQUITY