Specialty Auto Racing Inc. retails racing products for BMWs, Porsches, and Ferraris. The following accounts and their balances appear in the ledger of Specialty Auto Racing Inc. on July 31, the end of the current year:Common Stock, $36 par$10,080,000Paid-In Capital from Sale of Treasury Stock—Common340,000Paid-In Capital in Excess of Par—Common Stock420,000Paid-In Capital in Excess of Par—Preferred Stock384,000Preferred 1% Stock, $150 par7,200,000Retained Earnings71,684,000Treasury Stock—Common1,008,000Fifty thousand shares of preferred and 300,000 shares of common stock are authorized. There are 24,000 shares of common stock held as treasury stock.Prepare the Stockholders' Equity section of the balance sheet as of July 31, the end of the current year using Method 1 of Exhibit 8. **Exhibit 8: Stockholders’ Equity Section of a Balance Sheet**---**Telex Inc. Balance Sheet** *December 31, 20Y7***Stockholders’ Equity**---**Method 1:****Paid-in capital:**- **Preferred 10% stock, $50 par (2,000 shares authorized and issued):** $100,000- **Excess over par:** $10,000 **Paid-in capital, preferred stock:** $110,000- **Common stock, $20 par (50,000 shares authorized, 45,000 shares issued):** $900,000- **Excess over par:** $190,000 **Paid-in capital, common stock:** $1,090,000- **From sale of treasury stock:** $2,000**Total paid-in capital:** $1,202,000- **Retained earnings:** $350,000- **Treasury stock (600 shares at cost):** $(27,000)**Total stockholders’ equity:** $1,525,000---**Method 2:****Contributed capital:**- **Preferred 10% stock, $50 par (2,000 shares authorized and issued):** $100,000- **Common stock, $20 par (50,000 shares authorized, 45,000 shares issued):** $900,000- **Additional paid-in capital:** $202,000**Total contributed capital:** $1,202,000- **Retained earnings:** $350,000- **Treasury stock (600 shares at cost):** $(27,000)**Total stockholders’ equity:** $1,525,000---**Analysis:**The exhibit presents two methods for displaying the stockholders' equity section of Telex Inc.'s balance sheet as of December 31, 20Y7. Both methods result in the same total stockholders' equity of $1,525,000, despite different organizational approaches to displaying contributed capital and paid-in capital details.

Stockholders’ Equity Section: It is refers to the section of the balance sheet that shows the…

Answered: Specialty Auto Racing Inc. retails…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Specialty Auto Racing Inc. retails racing products for BMWs, Porsches, and Ferraris. The following accounts and their balances appear in the ledger of Specialty Auto Racing Inc. on July 31, the end of the current year:

Common Stock, $36 par	$10,080,000
Paid-In Capital from Sale of Treasury Stock—Common	340,000
Paid-In Capital in Excess of Par—Common Stock	420,000
Paid-In Capital in Excess of Par—Preferred Stock	384,000
Preferred 1% Stock, $150 par	7,200,000
Retained Earnings	71,684,000
Treasury Stock—Common	1,008,000

Fifty thousand shares of preferred and 300,000 shares of common stock are authorized. There are 24,000 shares of common stock held as treasury stock.

Prepare the Stockholders' Equity section of the balance sheet as of July 31, the end of the current year using Method 1 of Exhibit 8.

**Exhibit 8: Stockholders’ Equity Section of a Balance Sheet**

---

**Telex Inc. Balance Sheet**
*December 31, 20Y7*

**Stockholders’ Equity**

---

**Method 1:**

**Paid-in capital:**

- **Preferred 10% stock, $50 par (2,000 shares authorized and issued):**
$100,000

- **Excess over par:**
$10,000
**Paid-in capital, preferred stock:**
$110,000

- **Common stock, $20 par (50,000 shares authorized, 45,000 shares issued):**
$900,000

- **Excess over par:**
$190,000
**Paid-in capital, common stock:**
$1,090,000

- **From sale of treasury stock:**
$2,000

**Total paid-in capital:**
$1,202,000

- **Retained earnings:**
$350,000

- **Treasury stock (600 shares at cost):**
$(27,000)

**Total stockholders’ equity:**
$1,525,000

---

**Method 2:**

**Contributed capital:**

- **Preferred 10% stock, $50 par (2,000 shares authorized and issued):**
$100,000

- **Common stock, $20 par (50,000 shares authorized, 45,000 shares issued):**
$900,000

- **Additional paid-in capital:**
$202,000

**Total contributed capital:**
$1,202,000

- **Retained earnings:**
$350,000

- **Treasury stock (600 shares at cost):**
$(27,000)

**Total stockholders’ equity:**
$1,525,000

---

**Analysis:**

The exhibit presents two methods for displaying the stockholders' equity section of Telex Inc.'s balance sheet as of December 31, 20Y7. Both methods result in the same total stockholders' equity of $1,525,000, despite different organizational approaches to displaying contributed capital and paid-in capital details.

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