Tandy Company was issued a charter by the state of Indiana on January 15 of this year. The charter authorized the following: Common stock, $5 par value, 116,000 shares authorized Preferred stock, 15 percent, par value $15 per share, 5,200 shares authorized During the year, the following transactions took place in the order presented: Sold and issued 20,600 shares of common stock at $30 cash per share. Sold and issued 2,000 shares of preferred stock at $34 cash per share. At the end of the year, the accounts showed net income of $41,200. No dividends were declared.

Required: 1. Prepare the stockholders' equity section of the balance sheet at the end of the year.

Equity section of the balance sheet at the end of the year

Authorized Share Capital

116,000 Common stock, $5 par value. 580,000

5,200 Preferred stock, 15 percent, par value $15 per share, 78,000

658,000

Issued Share Capital

Common stock

20,600 Common stock, $5 par value 103,000

Share Premium (20,600*$25) 515,000

Total 618,000

Preferred stock

2,000 Preferred stock, 15 percent, par value $15 per share 30,000

Share Premium (2,000*$19) 38,000

Total 68,000

Retained Earnings

Profit for the year 41,200

Total Equity 727,200

Explanation:

Price issued above the par value of a share is called share premium and is included in equity for each class of stock.

Profit for the year is also included in Equity as Part of the Retained Earnings.