Refer to the information provided in P10–2A.

Required:

Taking into consideration the beginning balances on January 1, 2021 and all the transactions during 2021, respond to the following for Donnie Hilfiger:

1. Prepare the stockholders’ equity section of the balance sheet as of December 31, 2021.

2. Prepare the statement of stockholders’ equity for the year ended December 31, 2021.

3. Explain how requirements 1 and 2 are similar and how they are different.

Donnie Hilfiger has two classes of stock authorized: $1 par preferred and $0.01 par value common. As of the beginning of 2021, 300 shares of preferred stock and 4,000 shares of common stock have been issued. The following transactions affect stockholders’ equity during 2021:

March 1 Issue 1,100 shares of common stock for $42 per share.

May 15 Purchase 400 shares of treasury stock for $35 per share.

July 10 Resell 200 shares of treasury stock purchased on May 15 for $40 per share.

October 15 Issue 200 shares of preferred stock for $45 per share.

December 1 Declare a cash dividend on both common and preferred stock of $0.50 per share to all stockholders of record on December 15. Dividends are not paid on treasury stock.

December 31 Pay the cash dividends declared on December 1.

Donnie Hilfiger has the following beginning balances in its stockholders’ equity accounts on January 1, 2021: Preferred Stock, $300; Common Stock, $40; Additional Paid-in Capital, $76,000; and Retained Earnings, $30,500. Net income for the year ended December 31, 2021, is $10,800.