When Resisto Systems, Inc., was formed, the company was authorized to issue 5,000 shares of $100 par value, 8 percent cumulative preferred stock, and 100,000 shares of $2 stated value common stock.
Half of the preferred stock was issued at a price of $103 per share, and 70,000 shares of the common stock were sold for $13 per share. At the end of the current year, Resisto has retained earnings of $382,000.
a.
Prepare the stockholders’ equity section of the company’s balance sheet at the end of the current year. (Omit the "$" sign in your response.)
Stockholders' Equity
(Click to select)Retained earningsCashCapital stockCumulative preferred stockTreasury stock
$
(Click to select)Common stockCashRetained earningsCapital stockTreasury stock
Additional paid-in capital:
(Click to select)Retained earningsCapital stockTreasury stockCashPreferred stock
(Click to select)Capital stockRetained earningsCommon stockTreasury stockCash
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Total paid-in capital
$
(Click to select)DividendsTreasury stockRetained earningsCapital stockCumulative preferred stock
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Total stockholders' equity
$
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To prepare the stockholders' equity section of the company's balance sheet at the end of the current year, we need to consider the details provided in the question.
First, let's calculate the amount of preferred stock issued and the amount received from the sale of common stock:
Preferred Stock:
Half of the preferred stock was issued at a price of $103 per share.
Number of shares issued = 5,000 / 2 = 2,500 shares
Total amount received from the issuance of preferred stock = 2,500 shares * $103 per share = $257,500
Common Stock:
70,000 shares of common stock were sold for $13 per share.
Total amount received from the sale of common stock = 70,000 shares * $13 per share = $910,000
Now, let's determine the components of the stockholders' equity section:
1. Common Stock:
Number of shares of common stock issued = 70,000 shares
Stated value per share = $2
Total common stock = Number of shares * Stated value per share = 70,000 shares * $2 per share = $140,000
2. Preferred Stock:
Number of shares of preferred stock issued = 2,500 shares
Par value per share = $100
Total preferred stock = Number of shares * Par value per share = 2,500 shares * $100 per share = $250,000
3. Additional Paid-in Capital:
Additional Paid-in Capital is calculated by subtracting the par value from the issue price for each share issued for both preferred and common stock.
For preferred stock:
Additional Paid-in Capital for preferred stock = Total amount received from preferred stock issuance - Par value of preferred stock = $257,500 - $250,000 = $7,500
For common stock:
All the amount received for the issuance of common stock is considered as Common Stock, so there is no additional paid-in capital for common stock.
4. Retained Earnings:
Retained earnings at the end of the current year = $382,000
Finally, let's calculate the total paid-in capital and total stockholders' equity:
Total Paid-in Capital = Common Stock + Preferred Stock + Additional Paid-in Capital
Total Paid-in Capital = $140,000 + $250,000 + $7,500 = $397,500
Total Stockholders' Equity = Total Paid-in Capital + Retained Earnings
Total Stockholders' Equity = $397,500 + $382,000 = $779,500
So, the stockholders' equity section of the company's balance sheet at the end of the current year is as follows:
Stockholders' Equity:
Common Stock: $140,000
Preferred Stock: $250,000
Additional Paid-in Capital: $7,500
Retained Earnings: $382,000
Total Paid-in Capital: $397,500
Total Stockholders' Equity: $779,500