Question

Specialty Auto Racing Inc. retails racing products for BMWs, Porsches, and Ferraris. The following accounts and their balances appear in the ledger of Specialty Auto Racing on July 31, the end of the current year:

Common Stock, $10 par $440,000
Paid-In Capital from Sale of Treasury Stock-Common 33,200
Paid-In Capital in Excess of Par-Common Stock 132,000
Paid-In Capital in Excess of Par-Preferred Stock 61,200
Preferred 4% Stock, $50 par 1,020,000
Retained Earnings 2,057,400
Treasury Stock-Common 38,500

Fifty thousand shares of preferred and 200,000 shares of common stock are authorized. There are 3,500 shares of common stock held as treasury stock.

Required:
Prepare the Stockholders' Equity section of the balance sheet as of July 31, the end of the current year.

Answer 1

Specialty Auto Racing Inc.

Stockholders' Equity section of the balance sheet as at July 31:

Authorized Share Capital:

Common Stock, 200,000 $10 par

Preferred 4% Stock, 50,000 $50 par

Common Stock, Issued share capital, $10 par $440,000

Paid-In Capital in Excess of Par-Common

Stock (132,000 + 33,200) 165,200

Treasury Stock-Common, 3,500 shares (38,500)

Preferred 4% Stock, $50 par 1,020,000

Paid-In Capital in Excess of Par-Preferred Stock 61,200

Retained Earnings 2,057,400

Total Equity $3,705,300

Step-by-step explanation:

The Stockholders equity section of the balance reports the Preferred stock, common stock, additional paid‐in‐capital, retained earnings, and treasury stock. It also discloses information regarding the par value, authorized shares, issued shares, and outstanding shares for each type of stock.

The Paid-in Capital from sale of Treasury stock- common of $33,200 is added to the Paid-in Capital in Excess of Par- Common Stock as there is no separate account for it.