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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881

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Cornerstones of Financial Accounti...

4th Edition
Jay Rich + 1 other
ISBN: 9781337690881
Textbook Problem
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Presentation of Stockholders' Equity

Steven’s Restorations was organized in January 2019. During 2019, Steven’s engaged in the following stockholder's equity activities:

  1. Secured approval for a corporate charter that authorizes Steven’s to sell 1,000,000, $10 par common shares and 75,000, $100 par preferred shares.
  2. Sold 480,000 of the common shares for $15 per share.
  3. Sold 25,000 of the preferred shares for $105 per share.
  4. Repurchased 2,000 shares of the common stock at a cost of $ 18 per share.
  5. Earned net income of $107,000.
  6. Paid dividends of $13,000.

Required:

Prepare the stockholders equity portion of Steven’s balance sheet as of December 31, 2019.

To determine

Concept introduction:

Stockholder’s Equity:

Stockholders Equity includes the paid up amount of all stocks (Common as well as preferred) issued and retained earnings balance. It represents the amount owed to the stockholders by the company. Stockholders Equity is the section of balance sheet’s equity part.

To prepare:

The Stockholder’s Equity Section as on Dec. 31, 2019.

Explanation

Stockholders Equity includes the paid up amount of all stocks (Common as well as preferred) issued and retained earnings balance. It represents the amount owed to the stockholders by the company. Stockholders Equity is the section of balance sheet’s equity part.

The two ways the company can distribute its assets to the shareholder’s before its liquidation are as follows:

The Stockholder’s Equity Section as on Dec. 31, 2019 is prepared as follows:

Statement of Stockholder’s Equity
Common Stock (480000 Shares @ $10) $ 4,800,000
Additional Paid ...

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