Finishing Touches has two classes of stock authorized: 8%, $10 par preferred, and $1 par value...

Question:

Finishing Touches has two classes of stock authorized: 8%, $10 par preferred, and $1 par value common. The following transactions affect stockholders' equity during 2018, its first year of operations:

January 2 Issues 100,000 shares of common stock for $17 per share.
February 6 Issues 1,200 shares of 8% preferred stock for $12 per share.
September 10 Repurchases 10,000 shares of its own common stock for $22 per share.
December 15 Reissues 5,000 shares of treasury stock at $27 per share.

In its first year of operations, Finishing Touches has net income of $142,000 and pays dividends at the end of the year of $95,000 ($1 per share) on all common shares outstanding and $960 on all preferred shares outstanding.

Required:

Prepare the stockholders' equity section of the balance sheet for Finishing Touches as of December 31, 2018.

What Is Retained Earnings:

Retained Earnings is a general ledger account that is presented in the Equity section of the balance sheet. A company's Retained Earnings include the cumulative income earned by the company net of any dividends distributed.

Answer and Explanation: 1

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See below.

ItemCalculation$
Common stock, $1 par=100,000 *1100,000
Preferred stock, 8%,10$ par=1,200 *1012,000
Additional paid in capital, Common =1...

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Items Reported in Retained Earnings

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Chapter 11 / Lesson 7
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In this lesson, we'll learn about the items reported under retained earnings. We'll also learn how to calculate retained earnings by using these items.


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