E11-5 (Algo) Determining the Effects of the Issuance of Common and Preferred Stock [LO 11-2, LO 11-4]
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Question:
E11-5 (Algo) Determining the Effects of the Issuance of Common and Preferred Stock [LO 11-2, LO 11-4]
Geis Incorporated was issued a charter on January 15 authorizing the following capital stock:
Common stock, $6 par, 100,000 shares, one vote per share. Preferred stock, 7 percent, par value $10 per share, 5,000 shares, nonvoting.
The following selected transactions were completed during the first year of operations in the order given:
- Issued 21,000 shares of the $6 par common stock at $19 cash per share.
- Issued 3,100 shares of preferred stock at $23 cash per share.
- At the end of the year, the accounts showed net income of $39,000. No dividends were declared.
Required:
- Prepare the stockholders equity section of the balance sheet at December 31.
- Assume that you are a common stockholder of Geis Incorporated. If the company needed additional capital, would you prefer to have it issue additional common stock or additional preferred stock?
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