Question

Bagwell's net income for the year ended December 31, Year 2 was $189,000. Information from Bagwell's comparative balance sheets is given below. Compute the cash received from the sale of its common stock during Year 2. At December 31 Year 2 Year 1 Common Stock, $5 par value $ 504,000 $ 453,600 Paid-in capital in excess of par 952,000 856,600 Retained earnings 692,000 585,600

Answer 1

Cash received from the sale of its common stock during Year 2 = $145,800

Step-by-step explanation:

We are given the following information;

At December 31 | Year 2 | Year 1

Common Stock, $5 par value | 504,000 | 453,600

Paid-in capital in excess of par | 952,000 | 856,600

Retained earnings | 692,000 | 585,600

We are asked to compute the cash received from the sale of its common stock during Year 2, which is calculated using,

CR_2 = CS_2 + PC_2 - CS_1 - PC_1

Where

CR_2 = Cash received from the sale of its common stock during Year 2

CS_2 = Common stock in year 2

CS_1 = Common stock in Year 1

PC_2 = Paid in capital in excess of par in year 2

PC_1 = Paid in capital in excess of par in year 1

CR_2 = 504,000 + 952,000 - 453,600 - 856,600

CR_2 = 145,800

Therefore, cash received from the sale of its common stock during Year 2 is $145,800