Question

Stockholders' equity using the following accounts and balances, prepare the "stockholders’ equity" section of the balance sheet. 80,000 shares of common stock authorized, and 2,000 shares have been reacquired. Common stock, $40 par $2,560,000, Paid-in capital from sale of treasury stock $128,000, Paid-in capital in excess of par—common stock $768,000, Retained earnings $1,434,000, Treasury stock $88,000.

a. Common Stock: $2,560,000, Paid-in Capital: $896,000, Retained Earnings: $1,434,000, Treasury Stock: $88,000
b. Common Stock: $2,560,000, Paid-in Capital: $896,000, Retained Earnings: $1,434,000, Treasury Stock: $90,000
c. Common Stock: $2,560,000, Paid-in Capital: $896,000, Retained Earnings: $1,434,000, Treasury Stock: $128,000
d. Common Stock: $2,640,000, Paid-in Capital: $896,000, Retained Earnings: $1,434,000, Treasury Stock: $88,000

Answer 1

The stockholders' equity section of the balance sheet includes common stock, paid-in capital in excess of par, retained earnings, and treasury stock. The sum for paid-in capital is calculated by adding paid-in capital from the sale of treasury stock to paid-in capital in excess of par. The correct presentation would be option (a) with treasury stock deducted from the total equity.

Step-by-step explanation:

To prepare the stockholders' equity section of the balance sheet, we need to list the elements comprising stockholders' equity and their respective values. The stockholders' equity includes common stock, paid-in capital in excess of par, retained earnings, and treasury stock. Note that treasury stock is subtracted from equity because it represents stock that the company has repurchased and is no longer outstanding.

The correct answer is:

• Common Stock: $2,560,000
• Paid-in Capital: (Paid-in capital from sale of treasury stock $128,000 + Paid-in capital in excess of par $768,000) = $896,000
• Retained Earnings: $1,434,000
• Treasury Stock: $(88,000)

Therefore, the stockholders' equity section would be reported as option (a):

• Common Stock: $2,560,000
• Paid-in Capital: $896,000
• Retained Earnings: $1,434,000
• Treasury Stock: $(88,000)