Question

Nautical has two classes of stock authorized: $10 par preferred, and $1 par value common. As of the beginning of 2018, 125 shares of preferred stock and 3,000 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2018: March 1 Issue 3,000 additional shares of common stock for $10 per share. April 1 Issue 175 additional shares of preferred stock for $40 per share. June 1 Declare a cash dividend on both common and preferred stock of $0.25 per share to all stockholders of record on June 15. June 30 Pay the cash dividends declared on June 1. August 1 Purchase 175 shares of common treasury stock for $7 per share. October 1 Reissue 125 shares of treasury stock purchased on August 1 for $9 per share. Nautical has the following beginning balances in its stockholders’ equity accounts on January 1, 2018: Preferred Stock, $1,250; Common Stock, $3,000; Additional Paid-in Capital, $19,500; and Retained Earnings, $11,500. Net income for the year ended December 31, 2018, is $7,650. Taking into consideration the beginning balances on January 1, 2018 and all the transactions during 2018, respond to the following for Nautical: Required:1. Prepare the stockholders’ equity section of the balance sheet as of December 31, 2018.2. Prepare the statement of stockholders’ equity for the year ended December 31, 2018

Answer 1

Answer: Total owners Equity $72,250, Total statement of stockholders Equity $70,300

Explanation:

Stockholders Equity section of the balance sheet

$

Authorised share capital 3,000 shares @ $1. 3,000

Preference share. 125 shares @ $10. 1,250

Issued share capital

Common Stock 3,000 shares @ $10 per share. 30,000

Preference share 175 share @$40 per share. 7,000

Additional paid in capital. 19,500

Retained Earning. 11,500

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Total owners Equity. 72,250

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Statement of stockholders Equity for the year ended December 31st 2018

Common Stock Preference stock paid in capital Retained Earning Treasury stock TTL

$ $ $ $ $ $

Bal 3,000. 1,250. 19,500. 11,500. 1,875. 37,125

Issue shares 30,000 7,000

Purchase of treasury stock. 1,225. 1,225

Net income. 7,650. 7,650

Cash dividend

Common Stock. (12,000) (12,000)

Preference stock. (700) (700)

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Bal on Dec 31 33,000. 8,250. 19,500. 6,450. 3,100. 70,300

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