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Chapter 15: Question 3BE (page 811)

Wilco Corporation has the following account balances at December 31, 2017.

Common stock, \(5 par value \) 510,000

Treasury stock 90,000

Retained earnings 2,340,000

Paid-in capital in excess of par—common stock 1,320,000

Prepare Wilco’s December 31, 2017, stockholders’ equity section.

Short Answer

Expert verified

The total stockholders’ equity of Wilco on December 31, 2017, is $4,080,000.

Step by step solution

01

Meaning of Stockholders’ equity

In simple words, company net worth (or shareholders' equity) measures the amount of money that the owners of the company invested into the business.

02

Preparing Wilco’s Stockholders’ Equity.

WILCO CORPORATION

Stockholders’ equity

December 31, 2017


Common stock, $5 par value

$ 510,000

Paid-in capital in excess

of par-common stock

1,320,000

Total paid-in capital

1,830,000

Retained earnings

2,340,000

4,170,000

Less: Treasury stock

90,000

Total stockholders’ equity

4,080,000

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Most popular questions from this chapter

(Stock Dividends and Stock Split) Oregon Inc. \(10 par common stock is selling for \)110 per share. Four million shares are currently issued and outstanding. The board of directors wishes to stimulate interest in Oregon common stock before a forthcoming stock issue but does not wish to distribute capital at this time. The board also believes that too many adjustments to the stockholders’ equity section, especially retained earnings, might discourage potential investors. The board has considered three options for stimulating interest in the stock:

The board has considered three options for stimulating interest in the stock:

  1. A 20% stock dividend.
  2. A 100% stock dividend.
  3. A 2-for-1 stock split.

Instructions

Acting as financial advisor to the board, you have been asked to report briefly on each option and, considering the board’s wishes, make a recommendation. Discuss the effects of each of the foregoing options.

Woolford Inc. declared a cash dividend of $1.00 per share on its 2 million outstanding shares. The dividend was declared on August 1, payable on September 9 to all stockholders of record on August 15. Prepare all journal entries necessary on those three dates.

The following is a summary of all relevant transactions of Vicario Corporation since it was organized in 2017. In 2017, 15,000 shares were authorized and 7,000 shares of common stock (\(50 par value) were issued at a price of \)57. In 2018, 1,000 shares were issued as a stock dividend when the stock was selling for \(60. Three hundred shares of common stock were bought in 2019 at a cost of \)64 per share. These 300 shares are still in the company treasury.

In 2018, 10,000 preferred shares were authorized and the company issued 5,000 of them (\(100 par value) at \)113. Some of the preferred stock was reacquired by the company and later reissued for \(4,700 more than it cost the company.

The corporation has earned a total of \)610,000 in net income after income taxes and paid out a total of $312,600 in cash dividends since incorporation.

Instructions

Prepare the stockholders’ equity section of the balance sheet in proper form for Vicario Corporation as of December 31, 2019. Account for treasury stock using the cost method.

Indicate how each of the following accounts should be classified in the stockholders’ equity section.

  1. Common Stock.
  2. Retained Earnings.
  3. Paid-in Capital in Excess of Par—Common Stock.
  4. Treasury Stock.
  5. Paid-in Capital from Treasury Stock.
  6. Paid-in Capital in Excess of Stated Value—Common Stock.
  7. Preferred Stock.

Washington Company has the following stockholders’ equity accounts at December 31, 2017.

Common Stock (\(100 par value, authorized 8,000 shares) \)480,000

Retained Earnings 294,000

Instructions

a. Prepare entries in journal form to record the following transactions, which took place during 2018.

1. 280 shares of outstanding stock were purchased at \(97 per share. (These are to be accounted for using the cost method.)

2. A \)20 per share cash dividend was declared.

3. The dividend declared in (2) above was paid.

4. The treasury shares purchased in (1) above were resold at \(102 per share.

5. 500 shares of outstanding stock were purchased at \)105 per share.

6. 350 of the shares purchased in (5) above were resold at \(96 per share.

b.Prepare the stockholders’ equity section of Washington Company’s balance sheet after giving effect to these transactions, assuming that the net income for 2018 was \)94,000. State law requires restriction of retained earnings for the amount of treasury stock.
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