Penn Company was formed on July 1, 2008. It was authorized to issue 300,000 shares of $10 par value common stock and 100,000shares of 8% $25 par value, cumulative and non participating preferred stock. Penn Company has July1-June 30 fiscal year. The following information relates to the stock holders' equity accounts of Penn Company.
Common Stock
Prior to the 2010-11 fiscal year, Penn Company had 110,000 shares of outsanding common stock issued as follows.
1. 85,000 shares were issued for cash on July 1, 2008, at $31per share.
2. On July 24,2008, 5,000 shares were exchanged for a plot of land which cost the seller $70,000 in 2002 and had an estimated fair value of $220,000 on July 24, 2008.
3. 20,000 shares were issued on March 1,2009, for $42 pershare.
During the 2010-11 fiscal year, the following transctions regarding common stock took place.
Noverber 30, 2010 Penn purchased 2,000 shares of its own stock on the open market at $39 per share Penn uses the cost method for treasury stock.
December 15, 2010 Penn declared a 5% stock dividend for stockholders of record on January 15, 2011, to be issued on January 31, 2011. Penn was having a liquidity problem and could not afford a cash dividend at the time. Penn's commonstock was selling at $52 per share on december 15, 2010.
June 20,2011 Penn sold 500 shares of its own common stock that it had purchased on November 30, 2010, for$21,000.
Preferred Stock
penn issued 40,000 shares of preferred stock at $44 per shareon July 1, 2009.
Cash Dividends
Penn has followed a schedule cash dividends in December and June, with payment being made to stockholders of record in the following month. The cash dividends which have been declared since inception of the compnay through June 30, 2011 are shownbelow.
Declaration date Commonstock Preferred Stock
12/15/09 $0.30per share $1.00 per share
6/15/10 $0.30per share $1.00 per share
12/15/10 - $1.00per share
No cash dividends were declared during June 2011 due to the company's liquidity problems.
Retained Earnings
As of June 30, 2010 Penn's retained earnings account had abalance of $690,000. For the fiscal year ending June 30,2011, Penn reported net income of $40,000.
Instructions
Prepare the stockholder's equity section of the balance sheet, including appropriate notes, for Penn Company as of June 30,2011, as it should appear in its annual report to the shareholders.