Problem

Ace Corporation has the following capital structure at the beginning of the year:

5% Preferred stock , $100 par value, 20,000 shares authorized, outstanding 15,000 shares issued and outstanding 1,500,000

Common stock, $10 par value, 200,000 shares authorized, 140, 00 shares issued and outstanding 1,400,000

Paid in capital in excess of par - Common 300,000

Total paid in capital 3,200,000

Retained earnings 1,000,000

Total stockholders ' equity 4,200,000

INSTRUCTION

a) Record the following transactions which occurred consecutively

Assume that net income for the year was $700,000

Jan 15, A total cash dividend of $400,000 was declared and payable to stockholders of record.

June 1, A 10% common stock dividend was declared. The average market value of the common stock is $16 a share.

Sept 10, 20,000 shares of common were issued for $18 per share.

Nov 1, 1000 shares of common were repurchased for future use at $19 per share

Dec 1, 200 shares of the treasury stock was reissued at $20 per share

b) Construct the stockholder's equity section incorporating all the above information.