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United Resources Company obtained a charter from the state in January of this year. The charter authorized 200,000 shares of common stock with a par value of $1. During the year, the company earned $590,000. Also during the year, the following selected transactions occurred in the order given:

a. Sold 100,000 shares of the common stock in an initial public offering at $12 cash per share.
b. Repurchased 20,000 shares of the previously issued shares at $15 cash per share.
c. Resold 5,000 of the shares of the treasury stock at $18 cash per share.

Required:
Prepare the stockholders’ equity section of the balance sheet at the end of the year. (Amounts to be deducted should be indicated with a minus sign.)

Respuesta :

hamzatauseef

Answer:

See explanation.

Explanation:

Shareholders' Equity

Authorized Shares                                                200,000 Shares

Common Stock out standing (85,000 * 1) (w1)     $85,000

Treasury Stock (w3)                                              $15,000

Additional paid in capital  (w2)                             $715,000

Retained earnings                                                  $590,000

                                                                                $1,405,000

Workings

(W1)

Common stock is recorded at par value. Total number of shares outstanding are,

Outstanding = 100,000 - 20,000 + 5000 = 85000 @ $1 each

(W2)

Additional Paid in capital is the premium paid on shares,

In the initial offering of 100,000 shares, $11 per share was paid in thus bringing in a total of $1,100,000.

This amount was then used to repurchase stock

Repurchase deduction = 20,000 * 15 = $300,000

Later the stock re issue brought in a premium of 18 - 1 =$17 per share thus a total of 5000 * 17 = $85,000

This brings the balance of paid in capital as

Paid in capital = 1,100,000 - 300,000 + 85,000 = $715,000,

(W3)

Notice that when we paid for repurchase we paid the par value plus premium, the par value is 20,000 @ $1 =20,000 and after reissue it is reduced to 20,000 - 5000 = 15,000.  This is the amount of treasury stock held, which we deducted from the Additional paid in capital account.

Hope that helps.

anthougo

The preparation of the stockholders' equity section of the balance sheet at the end of the year for United Resources Company will look like this:

Stockholders' Equity Section

United Resources Company

Balance Sheet at the end of the year

Common Stock, 200,000 shares at a par value of $1

Issued Shares:

Common Stock, 85,000 issued and outstanding shares,  $105,000

Treasury Stock,  15,000 shares,                                            ($15,000)

Additional Paid-Capital                                                          905,000

Net income                                                                             590,000

Total equity                                                                       $1,585,000

Data Analysis:

Authorized share capital:

Common Stock, 200,000 shares at a par value of $1

Net income = $590,000

a. Cash $1,200,000 Common Stock $100,000 Additional Paid-in Capital $1,100,000

Issuance of 100,000 shares of the common stock in an initial public offering at $12 cash per share.

b. Treasury Stock $20,000 Additional Paid-in Capital $280,000 Cash $300,000

Repurchase of 20,000 shares of the previously issued shares at $15 cash per share.

c. Cash $90,000 Common Stock $5,000 Additional Paid-in Capital $85,000

Resale of 5,000 of the shares of the treasury stock at $18 cash per share.

Learn more about the stockholders' equity section of the balance sheet at https://brainly.com/question/15833990

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