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    kaylamarie1's Avatar
    kaylamarie1 Posts: 3, Reputation: 1
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    #1

    Oct 21, 2013, 09:23 PM
    Analysis of stockholders' equity
    Star Corporation issued both common and preferred stock during 20X8. The stockholders' equity sections of the company's balance sheets at the end of 20X8 and 20X7 follow.


    20X8 20X7
    Preferred stock, $100 par value, 10% $600,000 $500,000
    Common stock, $10 par value 2,350,000 1,550,000

    Paid-in capital in excess of par value
    Preferred 24,000 —
    Common 4,620,000 3,600,000
    Retained earnings 8,470,000 6,920,000
    Total stockholders' equity $16,064,000 $12,570,000

    1. Compute the number of preferred shares that were issued during 20X
    2. Calculate the average issue price of the common stock sold in 20X8.
    3. By what amount did the company's paid-in capital increase during 20X8?
    4. Did Star's total legal capital increase or decrease during 20X8? By what amount?

    I have googled calculations on how to complete these questions and have not found any. My online book with Ashford university doesn't show them either. So I am lost.
    rehmanvohra's Avatar
    rehmanvohra Posts: 739, Reputation: 27
    Senior Member
     
    #2

    Oct 21, 2013, 11:25 PM
    20X8 20X7
    Preferred stock, $100 par value, 10% $600,000 $500,000
    Common stock, $10 par value 2,350,000 1,550,000

    Paid-in capital in excess of par value
    Preferred 24,000 —
    Common 4,620,000 3,600,000
    Retained earnings 8,470,000 6,920,000
    Total stockholders' equity $16,064,000 $12,570,000

    1. Compute the number of preferred shares that were issued during 20X8
    ($600,500,000)/100 = 1,000 shares

    2. Calculate the average issue price of the common stock sold in 20X8.
    ($2,350,000-1,550,000) - (4,620,000-3,600,000)= $1,870,000/$850,000/10)=$22
    3. By what amount did the company's paid-in capital increase during 20X8?
    ($600,000+2,350,000+24,000+4620,000) - (500,000+1,550,000+3,600,000)=1,944,000
    4. Did Star's total legal capital increase or decrease during 20X8? By what amount?
    $16,064,000-12570,000 = $3,494,000

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