Presented below is the Stockholders’ Equity section from the Balance Sheet of RM
ID: 2497670 • Letter: P
Question
Presented below is the Stockholders’ Equity section from the Balance Sheet of RMC as of February 28 2014:
2014
Preferred stock, $.10 par value; 250,000 authorized, -0- shares issued and outstanding
-0-
Common stock, $.03 par value; 100,000,000 shares authorized; 6,140,200 shares issued and outstanding
$184,206
Additional paid-in capital
$8,921,723
Retained earnings
$10,344,794
Non-controlling interest in equity of subsidiary
$401,655
Total stockholders’ equity
$19,852,378
Start with the balance in each of the stockholders’ equity accounts as of February 28, 2014 and assume the transaction below occurred during the ensuing year ended February 28, 2015. Recast the stockholders’ equity section of the balance sheet as it would appear on February 28, 2015. Please include all appropriate descriptions necessary for proper disclosure. Assume non-controlling interest in equity of subsidiary remained unchanged.
March 15
Issued 1,000 shares of preferred stock for $10 cash per share.
April 15
Issued 4,000 shares of common stock at $13 cash per share.
May 17
Issued 1,700 shares of common stock in exchange for a prototype candy-making machine when the share price was $12 per share. The inventor had asked $23,000 for the machine, but agreed to accept 1,700 shares instead.
June 1
Announced and enacted a 3-for-1 stock split for common stock only.
July 15
Purchased 21,200 treasury shares at $4 each.
September 15
Sold 11,000 treasury shares at $6 per share.
December 31
Declared and distributed a 5% common stock dividend when the market price was $4.50 per share.
December 31
Declared cash dividends of $1,500,000.
February 28
Net income for the year ended February 28, 2015 was $3,750,000.
2014
Preferred stock, $.10 par value; 250,000 authorized, -0- shares issued and outstanding
-0-
Common stock, $.03 par value; 100,000,000 shares authorized; 6,140,200 shares issued and outstanding
$184,206
Additional paid-in capital
$8,921,723
Retained earnings
$10,344,794
Non-controlling interest in equity of subsidiary
$401,655
Total stockholders’ equity
$19,852,378
Explanation / Answer
Answer:
$ 10,344,794
Particulars End of 2014 During 2015 End of 2015 Preferred Stock NIL issued 1000 shares for $ 10 cash per share $ 10,000; par value $ 10; Authorised Shares 250,000; 1,000 shares issued and outstanding Common Stock $ 184206; FV $ 0.03; 6,140,200 shares Issued 4,000 shares at $ 13 cash per share; $ 0.03 per share will add to Common Stock and $ 12.97 per share will add to additional paid in capital. $ 184,326; FV $ 0.03; 6,144,200 shares issued Issued 1,700 shares against $ 23,000 value machine. $ 0.03 per share will add to Common Stock and ($ 23,000 / 1,700) - $ 0.03 = $ 13.499 or $ 13.50 will add to additional paid in capital. $ 184,377; FV $ 0.03; 6,145,900 shares issued Stock Split 3 for 1 common stock $ 184,377; FV $ 0.01; 18,437,700 shares issued; Authorised Shares 300,000,000 Common Stock Dividend Declared and distributed 5% of 18,437,700 shares at $ 4.50; $ 0.01 per share will add to face value. $ 193,595.85; FV $ 0.01; 19,359,585 shares issued; Authorised Shares 300,000,000 Treasury Shares NIL Purchase of 21,200 Treasury Shares for $ 4 per share $ 84,800; $ 4 par value; 21,200 treasury shares. Sold 11,000 shares for $ 6 per share. It will reduce treasury share balance by 11,000 x $ 4 = $ 44,000 and addition to additional paid in capital $ 2 x 11,000 = $ 22,000 $ 40,800; $ 4 purchase value; 10,400 treasury shares Additional Paid in Capital $ 8,921,723 $ 51,880 (Addition for fresh stock issue 4,000 x $ 12.97) + $ 22,950 (Addition for exchange shares 1,700 x $ 13.50) + $ 22,000 (Addition for premium on treasury stock sale $ 22,000) + $ 4,139,263 (Addition for common stock dividend 5% of 18,437,700 shares at $ 4.49 per share) $ 13,157,816 Retained Earnings$ 10,344,794
Add: $ 3,750,000 (Profit durinh the year) - $ 1,500,000 (Dividend Declared) Note: Common Stock Dividend Declared and Distributed is already adjusted from this profit. $ 12,594,794 Non-controlling interest in equity of subsidiary $ 401,655 $ 401,655 Total Stockholders Equity $ 26,398,660.85