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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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Dana Company reported the following amounts in the shareholders’ equity section of its December 31, 2018, balance sheet:

Chapter 16, Problem 9P, Dana Company reported the following amounts in the shareholders equity section of its December 31,

During 2019, Dana’s net income was $83,000 and its dividends on preferred and common stock were $9,900 and $17,600, respectively. In addition, the following transactions affected its shareholders’ equity:

  1. 1. Purchased 750 shares of its outstanding common stock as treasury stock for $22 per share.
  2. 2. Sold 500 shares of treasury stock at $27 per share. The company uses the cost method to account for treasury stock.
  3. 3. Retired 200 of the common shares held in the treasury.
  4. 4. Issued 100 shares of preferred stock for $125 per share.
  5. 5. The aggregate market value of the company’s long-term investments in available-for-sale debt securities dropped below the carrying value of these securities at year-end. The difference between the carrying value and the year-end marker value totals $10,000 (net of taxes).

    Required:

    1. Prepare Dana’s statement of shareholders’ equity for 2019. (Hint: This statement will include more than 10 numerical columns.) Assume Dana reports its comprehensive income in this statement.

    2. Prepare the shareholders’ equity section of Dana’s balance sheet as of December 31, 2019. Include any related notes to its financial statements.

1.

To determine

Prepare statement of shareholder’s equity for the Company D for the year ended 2019 by assuming that it reports comprehensive income in its statement.

Explanation

Shareholder’s 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.

(Figure 1)

Working notes:

(1) Calculation of addition paid-in capital on common stock when treasury stock is retired:

Addition paid-in capital on common stock when treasury stock is retired}=(Additional paid-in capital on common stock)Number of common stock issued ×(Common stock held in treasury stock retired )=99,0009,000×200=2,200

(2) Calculation of retained earnings when common stock

2.

To determine

Compute the stockholder’s equity section of Company D’s balance sheet as of December 31, 2019 and also provide notes to its financial statements.

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