Constructing the stockholders equity section

Problem: Sands Corporation has the following capital structure at the beginning of the year:

6% preferred stock, $50 par value, $300,000
20,000 shares authorized, 6,000 shares issues and outstanding

Common stock $10 par value 60,000 shares authorized $400,000
40,000 shares issued and outstanding

Paid in capital in excess of par $110,000
Total paid in capital 810,000

Retained earnings 440,000
Total Stockholder equity 1,250,000


a) Record the following transactions which occurred consecutively (show all calculations)

1) A total cash dividend of 90,000 was declared and payable to stockholders of record. Record dividends payable on common and preferred stock in separate accounts

2) A 10% common stock dividend was declared. The average market value of the common stock is $18 a share

3) Assume that net income for the year was $150,000 (record the closing entry) and the board of directories appropriated $70,000 of retained earnings to plant expansion

b) Construct the stockholders equity section incorporating all the above information

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Finance Basics: Constructing the stockholders equity section
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