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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281

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Intermediate Accounting: Reporting...

3rd Edition
James M. Wahlen + 2 others
ISBN: 9781337788281
Textbook Problem
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Changes in Shareholders’ Equity The shareholders’ equity section of Flores Design Company’s December 31, 2018, balance sheet appeared as follows:

Chapter 16, Problem 11E, Changes in Shareholders Equity The shareholders equity section of Flores Design Companys December

During 2019, the company entered into the following transactions affecting shareholders’ equity:

  1. 1. Issued 250 shares of preferred stock at $164 per share.
  2. 2. Issued 3,000 shares of common stock at $17 per share.
  3. 3. Reacquired 200 of its own common shares as treasury stock for $15 per share.
  4. 4. Reissued 250 shares of treasury stock at $17 per share (FIFO basis).
  5. 5. Net income for 2016 was $46,500. Dividends of $25,000 were distributed.

Required:

  1. 1. Prepare a statement of shareholders’ equity for the year ended December 31, 2019, for Flores.
  2. 2. Compute the return on shareholders’ equity for 2019.

1.

To determine

Compute the statement of shareholder’s equity for the year ended December 31, 2019.

Explanation

Stockholders’ equity:

The claims of owners on a company’s resources, after the liabilities are paid off, are referred to as stockholders’ equity. Therefore, stockholders’ equity is sometimes referred to as net worth of owners or shareholders or stockholders.

Compute the statement of shareholder’s equity for the year ended December 31, 2019.

(Figure 1)

Working note:

(1) Calculate the value additional paid in capital of preferred stock:

Value additional paid in capital of preferred stock}=Number of shares ×(Issue price Par value )=250×($164$100)=$16,000

(2) Calculate the value additional paid in capital of common stock:

Value additional

2.

To determine

Calculate the return on stockholder’s equity for the year 2019.

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