Tandy company was issued a charter by the state of indiana on january 15 of this year. the charter authorized the following: common stock, $10 par value, 103,000 shares authorized preferred stock, 9 percent, par value $8 per share, 4,000 shares authorized during the year, the following transactions took place in the order presented: sold and issued 20,000 shares of common stock at $16 cash per share. sold and issued 3,000 shares of preferred stock at $20 cash per share. at the end of the year, the accounts showed net income of $60,000. no dividends were declared.

required: prepare the stockholders' equity section of the balance sheet at the end of the year.

Explanation:

The preparation of the  stockholders' equity section of the balance sheet is shown below:

Common stock, $10 par value,

103,000 shares authorized and 20,000

shares of common stock issued                    $200,000  (20,000 × $10)

Paid in capital in excess of par value $120,000      {20,000 shares × ($16 - $10)}

Preferred stock, 3000 shares issued at par       $24,000      (3,000 shares × $8)

Paid in capital in excess of par value $36,000     {3,000 shares × ($20 - $8)}

Retained earnings                               $60,000

Total                                                     $440,000                  

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