Question

Quick fix-it corporation was organized in January 2011 to operate severl car repair businesses in a large metropolitan area. The charter issued by state authorized the following capital stock:

Common stock- $10 par value, 98,000 shares
Preferred stock- $50 par value, 8%, 59,000 shares

During Jan & Feb 2011, the following stock transactions were completed.

a. sold 78,000 shares of common stock at $20 per share and collected cash
b. sold 20,000 shares of preferred stock at $80 per share, collected the cash and immediately issued the stock.
c. bought 4,000 shares of common stock from a current stockholder for $20 per share.

Required:
Net income for 2011 was $90,000; cash divdiends declared and paid at year end were $30,000. Prepare the stockholders equity section of the balance sheet at December 31,2011

Answer 1

The stockholders' equity section of Quick Fix-it Corporation's balance sheet would include capital stock, additional paid-in capital if any, and retained earnings which would be the net income minus cash dividends, totaling to the sum of these components.

Step-by-step explanation:

The stockholders' equity section of the balance sheet for Quick Fix-it Corporation at December 31, 2011, would reflect the company's net income and dividend payments for the year, as well as any contributed capital from stock. Based on the information provided, and assuming no previous balance in equity accounts, the company would list the capital stock authorized and issued. We know the company had a net income of $90,000 for the year and declared and paid cash dividends of $30,000. This would mean the Retained Earnings for the year would be $60,000 (Net income of $90,000 less dividends of $30,000). Without data on the authorized stock or additional paid-in capital, we can't specify these amounts in our answer.

To summarize a generic stockholders' equity section:

• Common Stock - [Specify amount if known]
• Additional Paid-in Capital - [Specify amount if known]
• Retained Earnings - $60,000
• Total Stockholders' Equity - [Sum of the above three items]