Ask Question
29 November, 02:34

United Resources Company obtained a charter from the state in January of this year. The charter authorized 206,000 shares of common stock with a par value of $3. During the year, the company earned $493,000 Also during the year, the following selected transactions occurred in the order given: Sold 88,000 shares of the common stock in an initial public offering for $14 per share. Repurchased 26,000 shares of the previously issued shares for $17 per share. Resold 8,000 shares of treasury stock for $20 per share. Required: Prepare the stockholders' equity section of the balance sheet at the end of the year. (Amounts to be deducted should be indicated with a minus sign.)

0
Answers (1)
  1. 29 November, 04:04
    0
    United Resources Company

    Stockholders section of the balance sheet at the end of the year:

    Common Stock:

    Authorized 206,000 shares at $3 par value

    Issued 88,000 shares $264,000

    Additional Paid-in Capital

    ($968,000 - 364,000 + 136,000) 740,000

    Treasury Stock ($78,000 - 24,000) (54,000)

    Total Equity $950,000

    Explanation:

    a) The authorized common stock is stated in the balance sheet as a memorandum record. It does not form part of the calculation of equity since all the shares have not been issued.

    b) Issued common stock is valued at 88,000 * $3 = $264,000

    c) The difference in the par value and the issue price is recorded in the Additional Paid-in Capital Account. It is also where the increases and decreases in Treasury stock above or below par values are recorded.

    d) Treasury Stock is a common stock contra account which records the repurchase and resale of common stock. Two methods are used. One recognizes the whole cost of treasury stock in the Treasury Stock account. It is called the costing method. The other method, called the par-value method, recognizes the above and below par value in the Additional Paid-in Capital.
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “United Resources Company obtained a charter from the state in January of this year. The charter authorized 206,000 shares of common stock ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers