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Intermediate Accounting: Reporting...
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Intermediate Accounting: Reporting...
Shareholders’ Equity Herrera Manufacturing Corporation completed the following transactions during its first year of operation, 2019:
- 1. The state authorized the issuance of 30,000 shares of $5 par common stock; 15,000 shares were issued at $22 per share,
- 2. The state authorized the issuance of 6,000 shares of $50 par preferred stock. All 6,000 shares were issued at $70 per share.
- 3. Herrera reacquired 1,000 shares of its outstanding common stock at $18 per share. The cost method is used to account for treasury stock.
- 4. 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.
- 5. Herrera sold 500 shares of treasury stock for $23 per share.
- 6. Net income for the first year of operations was $16,000. No dividends were declared.
Required:
Prepare the shareholders’ equity section (and any related notes to the financial statements) of Herrera’s balance sheet as of December 31, 2019.
Compute the stockholder’s equity section for Company H
Stockholders’ Equity Section:
It is refers to the section of the balance sheet that shows the available balance stockholders’ equity as on reported date at the end of the financial year.
Compute the stockholder’s equity section for Company H
| Company H | |
| Shareholder's equity | |
| For the year ended December 31,2019 | |
| Particulars | Amount in $ |
| Contributed Capital: | Â |
|  Preferred stock, $50 par (6,000 shares authorized, issued, and outstanding) | 300000 |
|
Common stock, $5 par (30,000 shares authorized, 15,000 shares issued of which 500 shares are being held as treasury stock) | Â Â Â Â Â Â Â Â Â Â 75,000 |
| Additional paid-in capital: | Â |
| Â Â Â Â On preferred stock (1) | Â Â Â Â Â Â Â Â 120,000 |
| Â Â Â Â On common stock (2) | Â Â Â Â Â Â Â Â 255,000 |
| Â Â Â Â From treasury stock (3) | Â Â Â Â Â Â Â Â Â Â Â Â 2,500 |
| Total contributed capital | Â Â Â Â Â Â Â Â 752,500 |
| Retained earnings | Â Â Â Â Â Â Â Â Â Â 16,000 |
| Accumulated other comprehensive income (loss): | Â |
| Â Â Â Unrealized decrease in value of available-for-sale securities | Â Â Â Â Â Â Â Â (25,000) |
| Total contributed capital, retained earnings, and accumulated other comprehensive income | Â Â Â Â Â Â Â Â 766,000 |
| Less: Treasury stock at cost (500 common shares at $18) | Â Â Â Â Â Â Â Â Â Â Â Â 9,000 |
| Total Shareholders’ Equity |       757,000 |
 (Table 1)
Working notes:
1) Calculate the value of preferred stock:
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