On January 1, Year 7, Knox Company showed the following alphabetical list of shareholders’ equity items:Additional paid-in capital on common stock$130,000Additional paid-in capital on preferred stock6,000Common stock, $10 par100,000Preferred stock, $100 par50,000Retained earnings224,000Accumulated other comprehensive income9,000During the year, the following events occurred and were properly recorded by the company:Knox issued 2,000 shares of common stock for $25 per share.Knox issued 110 shares of preferred stock for $116 per share.Knox reacquired 400 shares of its common stock as treasury stock at a cost of $26 per share. (Hint: Record the reacquisition cost in a Treasury Stock account.)Knox earned net income of $57,000.Knox paid a $7 per share dividend on the preferred stock and a $1.25 per share dividend on the common stock outstanding at the end of the year (treasury stock is not entitled to dividends).Required:Prepare a statement of shareholders' equity for Year 7, including retained earnings.

First, we need to calculate the changes in common stock and additional paid-in capital on common…

Answered: On January 1, Year 7, Knox Company…

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter15: Financial Statement Analysis

Section: Chapter Questions

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On January 1, Year 7, Knox Company showed the following alphabetical list of shareholders’ equity items:

Additional paid-in capital on common stock	$130,000
Additional paid-in capital on preferred stock	6,000
Common stock, $10 par	100,000
Preferred stock, $100 par	50,000
Retained earnings	224,000
Accumulated other comprehensive income	9,000

During the year, the following events occurred and were properly recorded by the company:

Knox issued 2,000 shares of common stock for $25 per share.
Knox issued 110 shares of preferred stock for $116 per share.
Knox reacquired 400 shares of its common stock as treasury stock at a cost of $26 per share. (Hint: Record the reacquisition cost in a Treasury Stock account.)
Knox earned net income of $57,000.
Knox paid a $7 per share dividend on the preferred stock and a $1.25 per share dividend on the common stock outstanding at the end of the year (treasury stock is not entitled to dividends).

Required:

Prepare a statement of shareholders' equity for Year 7, including retained earnings.

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