Question

In Draco Corporation’s first year of business, the following transactions affected its equity accounts. Issued 6,400 shares of $2 par value common stock for $42. It authorized 20,000 shares. Issued 1,600 shares of 12%, $10 par value preferred stock for $47. It authorized 3,000 shares. Reacquired 320 shares of common stock for $54 each. Retained earnings is impacted by reported net income of $74,000 and cash dividends of $27,000. Prepare the stockholders’ equity section of Draco’s balance sheet as of December 31. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Answer:

$373,720

Explanation:

Preparation of stockholders’ equity section of Draco’s balance sheet as of December 31

DRACO CORPORATION

Stockholders' Equity Section of the Balance Sheet

December 31

Preferred stock- $10 par value $16,000

(1,600*10)

Paid in capital in excess of par- Preferred stock 59,200

[(47-10)*1,600]

Common stock- $2 par value 12,800

(6,400*2)

Paid in capital in excess of par- Common stock 256,000

[(42-2)*6,400]

Retained earnings 47,000

(74,000-27,000)

Less: Treasury stock (17,280)

(320*54)

Total stockholders' equity $373,720

Therefore stockholders’ equity section of Draco’s balance sheet as of December 31 will be $373,720