Reference no: EM132773131

Early in 2007, Parker Industries was formed with authorization to issue 100,000 shares of $20 par value common stock and 10,000 shares of $100 par value cumulative preferred stock. During 2007, all the preferred stock was issued at par, and 80,000 shares of common stock were sold for $35 per share. The preferred stock is entitled to a dividend equal to 6 percent of its par value before any dividends are paid on the common stock.

During its first five years of business (2007 through 2011), the company earned income totaling $3,800,000 and paid dividends of 60 cents per share each year on the common stock outstanding. On January 2, 2009, the company purchased 1,000 shares of its own common stock in the open market for $40,000. On January 2, 2011, it reissued 600 shares of this treasury stock for $30,000. The remaining 400 shares were still held in treasury at December 31, 2011.

Problem a: Prepare the stockholders' equity section of the balance sheet at December 31, 2011. Include a supporting schedule showing

(1) your computation of any paid-in capital on treasury stock and

(2) retained earnings at the balance sheet date. (Hint: Income increases retained earnings, whereas dividends reduce retained earnings. Dividends are not paid on shares of stock held in treasury