Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

EXERCISE 11-5

Purpose: (L.O. 7) This exercise will illustrate how the components of stockholders' equity should be reported in the balance sheet.

Al Gore Corporation's charter authorizes 200,000 shares of $20 par value common stock, and 50,000 shares of 6% cumulative preferred stock, par value $100 per share. The preferred stock has a call price of $105.

The corporation engaged in the following stock transactions between the date of incorporation and December 31, 2014:

1. Issued 40,000 shares of common stock for $1,920,000 cash.
2. Issued 10,000 shares of preferred stock in exchange for machinery valued at $1,120,000.
3. Sold 1,500 shares of common stock at a price of $50 per share.
4. Purchased 2,000 shares of common stock at $46 per share for the treasury. The cost method was used to record the transaction.
5. Sold 500 shares of treasury stock for $51 per share.

At December 31, 2014, Gore's retained earnings balance was $2,200,000.

Instructions

Prepare the stockholders' equity section of the balance sheet at December 31, 2014, in good form.