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: Issued 20,000 shares of the $6 par common stock at $18 cash per share. Issued 3,000 shares of preferred stock at $22 cash per share. At the end of the year, the accounts showed net income of $38,000.

Required: 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, and maintaining your current level of voting control was important, would you prefer to have it issue additional common stock or additional preferred stock?

a. Additional Common Stock

b. Additional Preferred Stock