Question

The golden mushroom has two classes of stock authorized: 8%, $10 par preferred, and $1 par value common. the following transactions affect stockholders' equity during 2024, its first year of operations: january 2 issues 100,000 shares of common stock for $31 per share. february 6 issues 2,600 shares of 8% preferred stock for $12 per share. september 10 purchases 10,000 shares of its own common stock for $36 per share. december 15 resells 5,000 shares of treasury stock at $41 per share. in its first year of operations, the golden mushroom has net income of $156,000 and pays dividends at the end of the year of $95,000 ($1 per share) on all common shares outstanding and $2,080 on all preferred shares outstanding.

Required: Prepare the stockholders' equity section of the balance sheet for The Golden Mushroom as of December 31, 2024. (Amounts to be deducted should be indicated by a minus sign.)
THE GOLDEN MUSHROOM
Balance Sheet
(Stockholders’ Equity Section)
December 31, 2024
Stockholders’ equity: Total paid-in capital Total stockholders’ equity

Answer 1

To prepare the stockholders' equity section of the balance sheet for The Golden Mushroom as of December 31, 2024, we need to consider the transactions that affect stockholders' equity throughout the year. After considering these transactions, the total paid-in capital is $3,131,200 and the total stockholders' equity is $3,190,120.

Step-by-step explanation:

To prepare the stockholders' equity section of the balance sheet for The Golden Mushroom as of December 31, 2024, we need to consider the transactions that affect stockholders' equity throughout the year:

1. On January 2, the company issued 100,000 shares of common stock for $31 per share. This transaction increases the total paid-in capital.
2. On February 6, the company issued 2,600 shares of 8% preferred stock for $12 per share. This transaction also increases the total paid-in capital.
3. On September 10, the company purchased 10,000 shares of its own common stock for $36 per share. This transaction reduces the total stockholders' equity.
4. On December 15, the company resold 5,000 shares of treasury stock at $41 per share. This transaction increases the total stockholders' equity.

After considering these transactions, we can calculate the stockholders' equity section of the balance sheet as follows:

Total paid-in capital: $31 per share x 100,000 shares of common stock issued + $12 per share x 2,600 shares of preferred stock issued = $3,100,000 + $31,200 = $3,131,200

Total stockholders' equity: Total paid-in capital + Net income - Dividends = $3,131,200 + $156,000 - $95,000 - $2,080 = $3,190,120