Question

The financial statements for Highland Corporation included the following selected information:

Common stock $ 1,000,000
Retained earnings $ 770,000
Net income $ 1,020,000
Shares issued 100,000
Shares outstanding 77,000
Dividends declared and paid $ 690,000
The common stock was sold at a price of $31 per share.
1. What is the amount o f additional paid-in capital?
2. What was the amount of retained earnings at the beginning of the year?
3. How many shares are in treasury stock?

Answer 1

Highland Corporation

1. The amount of additional paid-in capital is:

= $210,000.

2. The amount of the retained earnings at the beginning of the year is:

= $440,000.

3. The number of shares in treasury stock is:

= 23,000 shares.

Step-by-step explanation:

a) Data and Calculations:

Common stock $ 1,000,000

Retained earnings $ 770,000

Net income $ 1,020,000

Shares issued 100,000

Shares outstanding 77,000

Dividends declared and paid $ 690,000

Price of common stock = $31 per share

1. The amount of additional paid-in capital is:

Issued stock = 100,000 * ($31 - $10) = $210,000

2. The amount of the retained earnings at the beginning of the year:

Retained earnings at the ending $ 770,000

Add dividend 690,000

Total available for distribution $1,460,000

Less Net income 1,020,000

Retained earnings at the beginning $440,000

3. Treasury stock = 23,000 (100,000 - 77,000)