Global Marine obtained a charter from the state in January that authorized 1,000,000 shares of common stock, $5 par value. During the first year, the company earned $400,000 of net income, declared no dividends, and the following selected transactions occurred in the order given:
1) Issued 100,000 shares of the common stock at $55 cash per share.
2) Reacquired 25,000 shares at $50 cash per share.
3) Reissued 10,000 shares from the treasury for $51 per share.
4) Reissued 10,000 shares from the treasury for $49 per share.
Required:
Prepare the stockholders' equity section of the balance sheet at December 31, 2013. (Amounts to be deducted should be indicated by a minus sign.)

The Stockholders Equity Section of the Global Marine's Balance Sheet is as follows:

Common Stock:

1,000,000 shares, Authorized at $5 par value

100,000 shares, Issued at $5 par value     $500,000

Additional Paid-in Capital                            7,025,000

5,000 shares Treasury Stock                         -25,000

Retained Earnings                                         400,000

Total equity                                              $7,900,000

Data and Calculations:

Authorized share capital:

1,000,000 shares, Common Stock at $5 par value

Net income for the first year = $400,000

1) Cash $5,500,000 Common Stock $500,000 Additional Paid-in Capital $5,000,000 100,000 shares

2) Treasury Stock $125,000 Additional Paid-in Capital $1,125,000 Cash $1,250,000  25,000 shares

3) Cash $510,000 Treasury Stock $50,000 Additional Paid-in Capital $460,000   10,000 shares

4) Cash $490,000 Treasury Stock $50,000 Additional Paid-in Capital $440,000  10,000 shares

                Common Stock     Additional Paid  Treasury Stock

1)                    $500,000              $5,000,000

2)                                                    $1,125,000        $125,000

3)                                                     $460,000        -$50,000

4)                                                     $440,000        -$50,000

Total            $500,000              $7,025,000        -$25,000

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Total equity of stock holder = $5,650,000

Explanation:

As per the data given in the question,

Balance sheet  Equity of Stock holder

Capital Contribution Amount

Common stock = $500,000 ((100,000 × $55) - ( 1,000,000 × $5))

Additional paid in capital = $5,000,000 ($5,000,000 + 10,000 - 10,000)

Retained earnings = $400,000

Total = $5,900,000 ($500,000 + $5,000,000 + $400,000)

Treasury stock at cost = $250,000 ($1,250,000 - $500,000 - $500,000)

Total equity of stock holder = $5,650,000 ($5,900,000 - $250,000)

b is the correct answer

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