The stockholders’ equity section of Sheridan Inc. at the beginning of the current year appears below.Common stock, $10 par value, authorized 1,043,000 shares, 321,000 shares issued and outstanding $3,210,000Paid-in capital in excess of par—common stock 562,000Retained earnings 624,000During the current year, the following transactions occurred.1. The company issued to the stockholders 109,000 rights. Ten rights are needed to buy one share of stock at $30. The rights were void after 30 days. The market price of the stock at this time was $32 per share.2. The company sold to the public a $204,000, 10% bond issue at 104. The company also issued with each $100 bond one detachable stock purchase warrant, which provided for the purchase of common stock at $28 per share. Shortly after issuance, similar bonds without warrants were selling at 96 and the warrants at $8.3. All but 5,450 of the rights issued in (1) were exercised in 30 days.4. At the end of the year, 80% of the warrants in (2) had been exercised, and the remaining were outstanding and in good standing.5. During the current year, the company granted stock options for 10,800 shares of common stock to company executives. The company, using a fair value option-pricing model, determines that each option is worth $10. The option price is $28. The options were to expire at year-end and were considered compensation for the current year.6. All but 1,080 shares related to the stock-option plan were exercised by year-end. The expiration resulted because one of the executives failed to fulfill an obligation related to the employment contract. No. Account Titles and ExplanationDebitCredit1.No EreryNo Erery2.Cash212160Dlacount on Bond PayableBordi Payable20000Pald-n Capital-Sock Warranta163203.CashCommen SeackPaldin Capital in Eces of Par- Common Seock2071004.Pald-in Captal-Sock Warranta13056Cash4596Common Sock16320Pald-in Capital in bcess of Par- Common Stock424325.Compenation Eperee108000Pald-in Capial-Sock Oprions1080006. For oetions eercisedCah2720Pald-n Capltal-Shock Opelone97200Common Sock97200Pald-in Capltal in Ecess of Par- Common Stock272140Eor entions leandPald-in Caphal-Sock Opelone10800Compensatlon bperse10800 (b)Prepare the stockholders' equity section of the balance sheet at the end of the current year. Assume that retained earnings at theend of the current year is $771,000.Sheridan Inc.Balance Sheet%24

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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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The stockholders’ equity section of Sheridan Inc. at the beginning of the current year appears below.

Common stock, $10 par value, authorized 1,043,000 shares, 321,000 shares issued and outstanding		$3,210,000
Paid-in capital in excess of par—common stock		562,000
Retained earnings		624,000

During the current year, the following transactions occurred.

1.		The company issued to the stockholders 109,000 rights. Ten rights are needed to buy one share of stock at $30. The rights were void after 30 days. The market price of the stock at this time was $32 per share.
2.		The company sold to the public a $204,000, 10% bond issue at 104. The company also issued with each $100 bond one detachable stock purchase warrant, which provided for the purchase of common stock at $28 per share. Shortly after issuance, similar bonds without warrants were selling at 96 and the warrants at $8.
3.		All but 5,450 of the rights issued in (1) were exercised in 30 days.
4.		At the end of the year, 80% of the warrants in (2) had been exercised, and the remaining were outstanding and in good standing.
5.		During the current year, the company granted stock options for 10,800 shares of common stock to company executives. The company, using a fair value option-pricing model, determines that each option is worth $10. The option price is $28. The options were to expire at year-end and were considered compensation for the current year.
6.		All but 1,080 shares related to the stock-option plan were exercised by year-end. The expiration resulted because one of the executives failed to fulfill an obligation related to the employment contract.

No. Account Titles and Explanation
Debit
Credit
1.
No Erery
No Erery
2.
Cash
212160
Dlacount on Bond Payable
Bordi Payable
20000
Pald-n Capital-Sock Warranta
16320
3.
Cash
Commen Seack
Paldin Capital in Eces of Par- Common Seock
207100
4.
Pald-in Captal-Sock Warranta
13056
Cash
4596
Common Sock
16320
Pald-in Capital in bcess of Par- Common Stock
42432
5.
Compenation Eperee
108000
Pald-in Capial-Sock Oprions
108000
6. For oetions eercised
Cah
2720
Pald-n Capltal-Shock Opelone
97200
Common Sock
97200
Pald-in Capltal in Ecess of Par- Common Stock
272140
Eor entions leand
Pald-in Caphal-Sock Opelone
10800
Compensatlon bperse
10800

(b)
Prepare the stockholders' equity section of the balance sheet at the end of the current year. Assume that retained earnings at the
end of the current year is $771,000.
Sheridan Inc.
Balance Sheet
%24

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