Witt Corporation received its charter during January of this year. The charter authorized the following stock:
Preferred stock: 10 percent, $10 par value, 21,000 shares authorized
Common stock: $8 par value, 50,000 shares authorized
During the year, the following transactions occurred in the order given:
a. Issued a total of 40,000 shares of the common stock at $12 cash per share
b. Sold 5,500 shares of the preferred stock at $16 cash per share
c. Sold 3,000 shares of the common stock at $15 cash per share and 1,000 shares of the preferred stock at $26 cash per share
d. Net income for the year was $96,000
Required:
Prepare the Stockholders' Equity section of the balance sheet at December 31, 2011.

w.1. Common stock = (Number of common shares issued in transaction a + Number of common shares issued in transaction c) * Par value of common stock = (40,000 + 3,000) * $8 = $344,000

w.2. Preferred stock = (Number of preferred shares issued in transaction b + Number of preferred shares sold in transaction c) * Par value of preferred stock = (5,500 + 1,000) * $10 = $65,000

w.3. Additional paid in capital - Common stock = (Number of common shares issued in transaction a * (Selling price per share of the transaction - Par value of common stock)) + (Number of common shares issued in transaction c * (Selling price per share of the transaction - Par value of common stock)) = (40,000 * ($12 - $8)) + (3,000 * ($15 - $8)) = $181,000

w.4. Additional paid in capital - Preferred stock = (Number of preferred shares issued in transaction b * (Selling price per share of the transaction - Par value of preferred stock)) + (Number of preferred shares issued in transaction c * (Selling price per share of the transaction - Par value of preferred stock)) = (5,500 * ($16 - $10)) + (1,000 * ($26 - $10)) = $49,000

ANTHOUGOGO ANTHOUGOGO · Answer 2

The preparation of the Stockholders' Equity Section of the Witt Corporation's Balance Sheet as of December 31, 2011, is as follows:

Witt Corporation

Balance Sheet

As of December 31, 2011

Stockholders' Equity Section

Authorized Shares:

21,000 shares, 10% Preferred Stock at $10

50,000 shares, Common Stock at $8

Issued and Outstanding:

Common Stock, 43,000 shares $344,000

Additional Paid-in Capital- Common 181,000

10% Preferred Stock, 6,500 shares 65,000

Additional Paid-in Capital- Preferred 49,000

Retained Income 96,000

Total stockholders' equity $735,000

Data Analysis:

a. Cash $480,000 Common Stock $320,000 Additional Paid-in Capital-Common $160,000

b. Cash $88,000 10% Preferred Stock $55,000 Additional Paid-in Capital- Preferred $33,000

c. Cash $45,000 Common Stock $24,000 Additional Paid-in Capital-Common $21,000

Cash $26,000 10% Preferred Stock $10,000 Additional Paid-in Capital- Preferred $16,000

d. Net income for the year = $96,000

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