Shareholders' EquityHerrera Manufacturing Corporation completed the following transactions during its first year of operation, 2019:The state authorized the issuance of 30,000 shares of $5 par common stock; 15,000 shares were issued at $22 per share.The state authorized the issuance of 6,000 shares of $50 par preferred stock. All 6,000 shares were issued at $70 per share.Herrera reacquired 1,000 shares of its outstanding common stock at $18 per share. The cost method is used to account for treasury stock.Herrera invested $50,000 of excess cash, not needed to finance operations, in long-term available-for-sale debt securities. At year-end, the market value of these securities was $47,500.Herrera sold 500 shares of treasury stock for $23 per share.Net income for the first year of operations was $16,000. No dividends were declared.Required:Prepare the shareholders' equity section of Herrera's balance sheet as of December 31, 2019.

Stockholders' equity: Stockholders' equity means the net assets available to shareholders after…

Answered: Herrera Manufacturing Corporation…

Cornerstones of Financial Accounting

4th Edition

ISBN:9781337690881

Author:Jay Rich, Jeff Jones

Publisher:Jay Rich, Jeff Jones

Chapter10: Stockholder's Equity

Section: Chapter Questions

Problem 81PSA

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Shareholders' Equity

Herrera Manufacturing Corporation completed the following transactions during its first year of operation, 2019:

The state authorized the issuance of 30,000 shares of $5 par common stock; 15,000 shares were issued at $22 per share.
The state authorized the issuance of 6,000 shares of $50 par preferred stock. All 6,000 shares were issued at $70 per share.
Herrera reacquired 1,000 shares of its outstanding common stock at $18 per share. The cost method is used to account for treasury stock.
Herrera invested $50,000 of excess cash, not needed to finance operations, in long-term available-for-sale debt securities. At year-end, the market value of these securities was $47,500.
Herrera sold 500 shares of treasury stock for $23 per share.
Net income for the first year of operations was $16,000. No dividends were declared.

Required:

Prepare the shareholders' equity section of Herrera's balance sheet as of December 31, 2019.

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