Problem 11.9A (Static) Reporting Stockholders' Equity with Treasury Stock and Stock Splits (LO11-4, LO11-5, LO11-7, LO11-8, LO11-9)

Early in 2017, Herndon Industries was formed with authorization to issue 250,000 shares of $10 par value common stock and 30,000 shares of $100 par value cumulative preferred stock. During 2017, all the preferred stock was issued at par, and 120,000 shares of common stock were sold for $16 per share. The preferred stock is entitled to a dividend equal to 10 percent of its par value before any dividends are paid on the common stock.

During its first five years of business (2017 through 2021), the company earned income totaling $3,700,000 and paid dividends of 50 cents per share each year on the common stock outstanding.

On January 2, 2019, the company purchased 20,000 shares of its own common stock in the open market for $400,000. On January 2, 2021, it reissued 10,000 shares of this treasury stock for $250,000. The remaining 10,000 were still held in treasury at December 31, 2021.

Required:

a. Prepare the stockholders equity section of the balance sheet for Herndon Industries at December 31, 2021.

b. As of December 31, compute Herndons book value per share of common stock. (Hint: Book value per share is computed only on the shares of stock outstanding.)

Prepare the stockholders equity section of the balance sheet for Herndon Industries at December 31, 2021.

HERNDON INDUSTRIES
Partial Balance Sheet
December 31, 2021
Stockholders' equity
Common stock, $10 par, 250,000 shares authorized, 120,000 shares issued
Additional paid-in capital - Common stock
Additional paid-in capital - Treasury stock
10% preferred stock, $100 par, cumulative, authorized, issued, and outstanding 30,000 shares
?
Total paid-in capital
Retained earnings
Subtotal
Less: Treasury stock
Total stockholders' equity at Dec. 31, 2021