Inside Incorporated was issued a charter on January 15, 2013, that authorized 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.
During 2013, the following selected transactions were completed in the order given:
a. Issued 20,000 shares of the $6 par common stock at $18 cash per share.
b. Issued 3,000 shares of preferred stock at $22 cash per share.
c. At the end of 2013, the accounts showed net income of $38,000.
Required:
1. Prepare the stockholders' equity section of the balance sheet at December 31, 2013.
2. Assume that you are a common stockholder. If Inside Incorporated needed additional capital, would you prefer to have it issue additional common stock or additional preferred stock? Explain.