Reference no: EM132721626

Problem 1: The Digital Systems Company was organized two years ago to take advantage of an Internet opportunity. Investors paid $12 a share for 2 million shares with a $4 par value. In the next two years, the company had earnings of $2 million and $3 million, respectively. It paid dividends of $1.2 million and $1.3 million, respectively, in those years. At the end of the first year, Digital sold another 500,000 shares of stock at $15.5 per share. Construct the equity section of Digital's balance sheet initially and at the end of its first and second years in business. An answer of $1.2 million should be entered as 1,200,000.