Hatch Company has two classes of capital stock outstanding: 8%, $20 par preferred and $5 par common. At December 31, 2014, the following accounts were included in stockholders� equity.Preferred Stock, 150,000 shares $ 3,000,000Common Stock, 2,000,000 shares 10,000,000Paid-in Capital in Excess of Par�Preferred Stock 200,000Paid-in Capital in Excess of Par�Common Stock 27,000,000Retained Earnings 4,500,000The following transactions affected stockholders� equity during 2015.Jan. 1 30,000 shares of preferred stock issued at $22 per share.Feb. 1 50,000 shares of common stock issued at $20 per share.June 1 2-for-1 stock split (par value reduced to $2.50).July 1 30,000 shares of common treasury stock purchased at $10 per share. Hatch uses the cost method.Sept. 15 10,000 shares of treasury stock reissued at $11 per share.Dec. 31 The preferred dividend is declared, and a common dividend of 50� per share is declared.Dec. 31 Net income is $2,100,000.Prepare the stockholders� equity section for Hatch Company at December 31, 2015

Answered: Hatch Company has two classes of…

Financial Accounting: The Impact on Decision Makers

10th Edition

ISBN:9781305654174

Author:Gary A. Porter, Curtis L. Norton

Publisher:Gary A. Porter, Curtis L. Norton

Chapter11: Stockholders' Equity

Section: Chapter Questions

Problem 11.16E

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Question

Hatch Company has two classes of capital stock outstanding: 8%, $20 par preferred and $5 par common. At December 31, 2014, the following accounts were included in stockholders� equity.

Preferred Stock, 150,000 shares		$ 3,000,000
Common Stock, 2,000,000 shares		10,000,000
Paid-in Capital in Excess of Par�Preferred Stock		200,000
Paid-in Capital in Excess of Par�Common Stock		27,000,000
Retained Earnings		4,500,000

The following transactions affected stockholders� equity during 2015.

Jan. 1		30,000 shares of preferred stock issued at $22 per share.
Feb. 1		50,000 shares of common stock issued at $20 per share.
June 1		2-for-1 stock split (par value reduced to $2.50).
July 1		30,000 shares of common treasury stock purchased at $10 per share. Hatch uses the cost method.
Sept. 15		10,000 shares of treasury stock reissued at $11 per share.
Dec. 31		The preferred dividend is declared, and a common dividend of 50� per share is declared.
Dec. 31		Net income is $2,100,000.

Prepare the stockholders� equity section for Hatch Company at December 31, 2015

Expert Solution

Explanation -

Stockholder's Equity -

Stockholder's Equity includes the amount contributed by shareholders issued in the form of common stock, Paid-in Capital, and Preferred Stock. Also includes Retained Earnings, which is the accumulated profit earned by the company and treasury stock.