Quick Fix-It Corporation was organized at the beginning of this year to operate several car repair businesses in a large metropolitan area. The charter issued by the state authorized the following stock: Common stock, $14 par value, 99,900 shares authorized Preferred stock, $45 par value, 8 percent, 59,700 shares authorized During January and February of this year, the following stock transactions were completed: a. Sold 78,600 shares of common stock at $28 cash per share. b. Sold 21,500 shares of preferred stock at $67 cash per share. c. Bought 5,400 shares of common stock from a current stockholder for $12 cash per share. Required: Net income for the year was $91,600; cash dividends declared and paid at year-end were $31,700. 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.)

Quick Fix-it corporation

Stockholders equity (extract)

Authorized:

99,000 units of common stock at $14 per unit

59,700 units of 8% preferred stock at $45 per unit

Issued:

73,200 units of common stock outstanding = $1,024,800

Premium on common stock = $1,104,000

21,500 units of 8% Preferred stock issued = $967,500

preferred stock issued above

Par = $473,000

Retained earnings = $70,700

Total stockholder Equity = $3,640,000.

Explanation:

Jan/Feb transactions:

A.

Sold 78,600 common stock for $28 (that is $14 par value and $14 premium quote)

Debit Cash Account with $2,208,000

Credit common Stock Account with $1,104,000

Credit stock holder Premium Account with $1,104,000

(Stock valuation - sales of 78,600 units)

B.

Sold 21,500 common stock for $67 (that is $45 par value and $22 premium quote)

Debit Cash with $1,440,500

Credit Preferred Stock Account with $967,500

Credit preferred stock issued above

Par Account with $473,000

(Preferred Stock valuation - sales of 21,500 units)

C.

Bought common stock of 5,400 units from a stockholder

Debit Common stock Account at Par with $75,600

Credit Cash Account with $64,800

Credit Net Income with $10,800

(Shares repurchased at a discounted price)

78,600 common stock at par = $1,104,000

Less 5,400 common stock sold = -$75,600

Outstanding 73,200 common stock = $1,024,800

Net income

Opening balance = $91,600

Less Cash dividend = -$31,700

Add profit from sale of shares = $10,800

Transferred to retained earnings = $70,700

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