O'Reilly logo

Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition by Donald E. Kieso, Paul D. Kimmel, Jerry J. Weygandt

Stay ahead with the world's most comprehensive technology and business learning platform.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, tutorials, and more.

Start Free Trial

No credit card required

EXERCISE 11-5

Purpose: (L.O. 7) This exercise will illustrate how the components of stockholders' equity should be reported in the balance sheet.

Al Gore Corporation's charter authorizes 200,000 shares of $20 par value common stock, and 50,000 shares of 6% cumulative preferred stock, par value $100 per share. The preferred stock has a call price of $105.

The corporation engaged in the following stock transactions between the date of incorporation and December 31, 2014:

  1. Issued 40,000 shares of common stock for $1,920,000 cash.
  2. Issued 10,000 shares of preferred stock in exchange for machinery valued at $1,120,000.
  3. Sold 1,500 shares of common stock at a price of $50 per share.
  4. Purchased 2,000 shares of common stock at $46 per share for the treasury. The cost method was used to record the transaction.
  5. Sold 500 shares of treasury stock for $51 per share.

At December 31, 2014, Gore's retained earnings balance was $2,200,000.

Instructions

Prepare the stockholders' equity section of the balance sheet at December 31, 2014, in good form.

With Safari, you learn the way you learn best. Get unlimited access to videos, live online training, learning paths, books, interactive tutorials, and more.

Start Free Trial

No credit card required