The Adams family decided early in 2015 to incorporate their family-owned farm under the name Adams Corporation.

Question:

The Adams family decided early in 2015 to incorporate their family-owned farm under the name Adams Corporation. The corporation was authorized to issue 100,000 shares of a single class of $1 par value capital stock. Presented below is the information necessary to prepare the stockholders' equity section of the company's balance sheet at the end of 2015 and at the end of 2016.

2015. In January the corporation issued to members of the Adams family 20,000 shares of capital stock in exchange for cash and other assets used in the operation of the farm. The fair market value of these assets indicated an issue price of $25 per share. In December, George Adams died and the corporation purchased 4,000 shares of its own capital stock from his estate at $30 per share. Because of the large cash outlay to acquire this treasury stock, the directors decided not to declare cash dividends in 2015 and instead declared a 10 percent stock dividend to be distributed in January 2016. The stock price at the declaration date was $31 per share. (The treasury shares do not participate in the stock dividend.) Net income for 2015 was $850,000.

2016. In January the corporation distributed the stock dividend declared in 2015, and in February, the 4,000 treasury shares were sold to Joan Adams at $35 per share. In June, the capital stock was split 2-for-1. (Approval was obtained to increase the authorized number of shares to 200,000.) On December 11, the directors declared a cash dividend of $1 per share, payable in January 2017. Net income for 2016 was $810,000.

Instructions

Using the format illustrated in Exhibit 12-6 , prepare the stockholders' equity section of the balance sheet at:

a. December 31, 2015.

b. December 31, 2016.

Show any necessary computations in supporting schedules.

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... Corporation
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may... 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,...