National League Gear has two classes of stock authorized: 4%, $20 par preferred,and $5 par value common.

Question:

National League Gear has two classes of stock authorized: 4%, $20 par preferred,and $5 par value common. The following transactions affect stockholders’ equity during 2021, National League’s first year of operations:

February 2 Issue 1.5 million shares of common stock for $35 per share.

February 4 Issue 600,000 shares of preferred stock for $23 per share.

June 15 Purchase 150,000 shares of its own common stock for $30 per share.

August 15 Resell 112,500 shares of treasury stock for $45 per share.

November 1 Declare a cash dividend on its common stock of $1.50 per share and a $480,000 (4% of par value) cash dividend on its preferred stock payable to all stockholders of record on November 15. Dividends are not paid on treasury stock.

November 30 Pay the dividends declared on November 1.

Required:

1. Record each of these transactions.

2. Prepare the stockholders’ equity section of the balance sheet as of December 31, 2021. Net income for the year was $4,900,000.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their... Par Value
Par value is the face value of a bond. Par value is important for a bond or fixed-income instrument because it determines its maturity value as well as the dollar value of coupon payments. The market price of a bond may be above or below par,...

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