Accounting -Penn Company was formed on July 1, 2012

| January 30, 2017

Question
Penn Company was formed on July 1, 2012. It was authorized to issue309,700shares of $12par value common stock and104,100shares of9% $25par value, cumulative and nonparticipating preferred stock. Penn Company has a July 1–June 30 fiscal year.

The following information relates to the stockholders’ equity accounts of Penn Company.

Common Stock
Prior to the 2014–2015 fiscal year, Penn Company had115,100shares of outstanding common stock issued as follows.

1. 91,700shares were issued for cash on July 1, 2012, at $32per share.
2. On July 24, 2012,5,000shares were exchanged for a plot of land which cost the seller $79,400in 2006 and had an estimated fair value of $228,100on July 24, 2012.
3. 18,400shares were issued on March 1, 2013, for $41per share.

During the 2014–2015 fiscal year, the following transactions regarding common stock took place.

November30,2014 Penn purchased2,900shares of its own stock on the open market at $38per share. Penn uses the cost method for treasury stock.
December15,2014 Penn declared a4% stock dividend for stockholders of record on January 15, 2015, to be issued on January 31, 2015. Penn was having a liquidity problem and could not afford a cash dividend at the time. Penn’s common stock was selling at $52per share on December 15, 2014.
June20,2015 Penn sold420shares of its own common stock that it had purchased on November 30, 2014, for $21,400.

Preferred Stock
Penn issued40,300shares of preferred stock at $44per share on July 1, 2013.

Cash Dividends
Penn has followed a schedule of declaring cash dividends in December and June, with payment being made to stockholders of record in the following month. The cash dividends which have been declared since inception of the company through June 30, 2015, are shown below.

Declaration
Date Common
Stock Preferred
Stock
12/15/13 $0.38per share $1per share
6/15/14 $0.38per share $1per share
12/15/14 $1per share

No cash dividends were declared during June 2015 due to the company’s liquidity problems.

Retained Earnings
As of June 30, 2014, Penn’s retained earnings account had a balance of $708,900. For the fiscal year ending June 30, 2015, Penn reported net income of $42,200.

Prepare the stockholders’ equity section of the balance sheet, for Penn Company as of June 30, 2015, as it should appear in its annual report to the shareholders.

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