Tandy Company was issued a charter by the state of Indiana on January 15 of this year. The charter authorized the following:
Common stock, $10 par value, 103,000 shares authorized
Preferred stock, 9 percent, par value $8 per share, 4,000 shares authorized
During the year, the following transactions took place in the order presented:
a. Sold and issued 20,000 shares of common stock at $16 cash per share.
b. Sold and issued 3,000 shares of preferred stock at $20 cash per share.
c. At the end of the year, the accounts showed net income of $60,000. No dividends were declared.
Required:
1. Prepare the stockholders' equity section of the balance sheet at the end of the year.
2. Assume that you are a common stockholder. If Tandy needed additional capital, would you prefer to have it issue additional common stock or additional preferred stock? Explain.