Question

Teller Corporation’s post-closing trial balance at December 31, 2017, was as follows.

TELLER CORPORATION POST-CLOSING TRIAL BALANCE DECEMBER 31, 2017
	Dr.	Cr.
Accounts payable		\( 310,000
Accounts receivable	\) 480,000
Accumulated depreciation—building and equipment		185,000
Allowance for doubtful accounts		30,000
Bonds payable		700,000
Building and equipment	1,450,000
Cash	190,000
Dividends payable on preference shares—cash		4,000
Inventories	560,000
Land	400,000
Prepaid expenses	40,000
Retained earnings		201,000
Share capital—ordinary (\(1 par value)		200,000
Share capital—preference (\)50 par value)		500,000
Share premium—ordinary		1,000,000
Share premium—treasury		160,000
Treasury shares—ordinary at cost	170,000
Totals	\(3,290,000	\)3,290,000

On December 31, 2017, Teller had the following number of ordinary and preference shares.

	Ordinary	Preference
Authorized	600,000	60,000
Issued	200,000	10,000
Outstanding	190,000	10,000

The dividends on preference shares are \(4 cumulative. In addition, the preference shares have a preference in the liquidation of \)50 per share.

Instructions

Prepare the equity section of Teller’s statement of financial position at December 31, 2017.

Short answer

The Total Value of Equity is $1,891,000.

Step-by-step solution

Meaning of Financial Position

The term financial position refers to the important aspect in business, which helps to know about the health of any business. This can be understood by analyzing the financial reports of the business.

Preparing Equity section of Teller Corporation

TELLER CORPORATION Partial Statement of Financial Position December 31, 2017
Equity Share capital- preference, cumulative, Par value $50 per share; authorized 60,000 shares, issued and outstanding 10,000 shares $ 500,000
Share capital-ordinary, par value $1 per share Authorized 600,000 shares, issued 200,000 Shares, and outstanding 190,000 shares 200,000	$700,000
Share premium-ordinary 1,000,000
Shares premium-treasury 160,000	1,160,000
Retained Earnings	201,000
Treasury shares 10,000 ordinary shares at a cost	(170,000)
Total Equity	$1,891,000

Working Notes:

Calculation of Share Capital –Preference

$\begin{array}{rcl}\mathrm{Share}\mathrm{capital}\mathrm{preference}& =& \mathrm{Shares}\times \mathrm{Per}\mathrm{share}\mathrm{value}\\ & =& 10,000\times \$50\\ & =& \$500,000\end{array}$

Calculation of Share Capital-ordinary

$\begin{array}{rcl}\mathrm{Share}\mathrm{capital}-\mathrm{Ordinary}& =& \mathrm{Issued}\mathrm{shares}\times \mathrm{Per}\mathrm{share}\mathrm{value}\\ & =& 200,000\times \$1\\ & =& \$200,000\end{array}$