Inside 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:
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 the year, the accounts showed net income of $ 38,000.
Required:
1. Prepare the stockholders’ equity section of the balance sheet at December 31.
2. Assume that you are a common stockholder of Inside Incorporated. If the company needed additional capital, would you prefer to have it issue additional common stock or additional preferred stock? Explain.