1. Issued preferred stock with a par value of $125,000 for $200,000 — Dirk Company reported the following balances December 2018 common 500 paid-in capital

Dirk Company reported the following balances at December 31, 2018: common stock $500,000, paid-in capital in excess of par value—common stock $100,000, and retained earnings $250,000. During 2019, the following transactions affected stockholders’ equity.

1. Issued preferred stock with a par value of $125,000 for $200,000.

2. Purchased treasury stock (common) for $40,000.

3. Earned net income of $180,000.

4. Declared and paid cash dividends of $56,000.

Instructions

Prepare the stockholders’ equity section of Dirk Company’s December 31, 2019, balance sheet.

SOLUTION

DIRK COMPANY

Balance Sheet (Partial)

December 31, 2019

Paid-in capital

Capital stock