A computer virus destroyed some of the financial information forPasquale Company’s stockholders’ equity section. You have beenasked to compute the missing account balances. The only informationyou can recover from the computer’s backup system is presentedhere:
| December 31, 2016 | December 31, 2017 |
Preferred stock | $3,000 | $3,000 |
Common stock | 8,000 | a.??? |
Paid-in capital in excess of par, preferred stock | 1,500 | 1,500 |
Paid-in-capital in excess of par, common stock | 12,000 | b.??? |
Paid-in capital, treasury stock | 0 | c.??? |
Retained earnings | 18,200 | 7,400 |
Treasury stock | 0 | (7,000) |
Total stockholders’ equity | 42,700 | d.???? |
During 2017, 7,000 shares of common stock with a par value of $1were issued when the market price per share was $12.
Cash dividends of $25,000 were paid to preferredshareholders.
Pasquale Company acquired 3,000 shares of common stock at $14 tohold as treasury stock.
Pasquale Company reissued 2,500 shares of treasury stock for$16.
Calculate the account balances for:
Common Stock
Paid-In Capital in Excess of Par, Common Stock
Paid-In Capital, Treasury Stock
Stockholders’ Equity
How much net income did Pasquale Company report for 2017?
To solve these, it is helpful to put together the journalentries for the transactions a-d, then calculate the accountbalances and net income.
Balance of Common Stock:
Balance of Paid-In Capital in Excess of Par, Common Stock:
Balance of Paid-In Capital, Treasury Stock:
Balance of Stockholders’ Equity:
Net Income Reported in 2017:
Beginning RetainedEarnings
+ NetIncome
-Dividends
= Ending RetainedEarnings
