Question

The following accounts and their balances were selected from the unadjusted trial balance of Point Loma Group Inc., a freight forwarder, at October 31, the end of the current fiscal year:

1 Common Stock, no par, $14 stated value
$4,480,000.00
2 Paid-In Capital from Sale of Treasury Stock
45,000.00
3 Paid-In Capital in Excess of Par-Preferred Stock
210,000.00
4 Paid-In Capital in Excess of Stated Value-Common Stock
480,000.00
5 Preferred 2% Stock, $120 par
8,400,000.00
6 Retained Earnings
39,500,000.00
Prepare the Paid-In Capital portion of the Stockholders’ Equity section of the balance sheet using Method 1 of
Exhibit 7
. There are 375,000 shares of common stock authorized and 85,000 shares of preferred stock authorized. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.

Answer 1

The student is asked to prepare the Paid-In Capital section of the Stockholders' Equity part of a balance sheet, which includes Common Stock at stated value, Paid-In Capital in Excess of Stated Value, Preferred Stock at par value, Paid-In Capital in Excess of Par, and Paid-In Capital from the Sale of Treasury Stock.

Step-by-step explanation:

The question asks to prepare the Paid-In Capital portion of the Stockholders’ Equity section of a balance sheet for Point Loma Group Inc., a freight forwarder. Based on the unadjusted trial balance provided at October 31, which marks the end of the current fiscal year. Assuming Method 1 of Exhibit 7 refers to a presentation format where individual components of Paid-In Capital are listed separately, the section could be arranged as follows:

• Common Stock, no par, $14 stated value (320,000 shares issued): $4,480,000.00
• Paid-In Capital in Excess of Stated Value-Common Stock: $480,000.00
• Preferred 2% Stock, $120 par (70,000 shares issued): $8,400,000.00
• Paid-In Capital in Excess of Par-Preferred Stock: $210,000.00
• Paid-In Capital from Sale of Treasury Stock: $45,000.00

The presented figures show the breakdown of the equity contributed by shareholders beyond the par or stated value of the stocks, as well as capital generated from treasury stock transactions. Note, the actual number of shares issued for common and preferred stock must be given to complete this section, the figures above assume issuance at the authorized amounts.

Answer 2

Loma Group Inc.

Paid-in Capital Portion of the Stockholders' Equity:

Common Stock, 320,000 issued at $14 stated value

, $4,480,000.00

Paid-In Capital in Excess of Stated Value-Common Stock 525,000.00

Preferred 2% Stock, $120 par 8,400,000.00

Paid-In Capital in Excess of Par-Preferred Stock 210,000.00

Total Paid-in Capital $13,615,000.00

Step-by-step explanation:

a) The Paid-In Capital in Excess of Stated Value-Common Stock:

As per trial balance $480,000.00

Treasury Stock 45,000.00

Total $525,000.00

b) The Paid-in Capital of the Stockholders' Equity is the element of Stockholders' Equity that includes only the paid-in capital (cash and other assets) received from stockholders. This portion excludes the Retained Earnings and the memorandum record of the authorized share capitals.