Presented below is information related to Edis Corporation:
Common Stock, $1 par $4,300,000
Paid-in Capital in Excess of Par?Common Stock 550,000
Preferred 8 1/2% Stock, $50 par 2,000,000
Paid-in Capital in Excess of Par?Preferred Stock 400,000
Retained Earnings 1,500,000
Treasury Common Stock (at cost) 150,000
1. Stockholders' equity would total to (4,300,000 + 550,000 + 2,000,000 + 400,000 + 1,500,000 - 150,000) = 8,600,000.
Only the treasury stock is a negative amount in the equity section because it is represents a reduction of capital. Why? Because assets were used to buy back stock: assets were reduced and capital is reduced as a result of the transaction.
2. The cash ...
The solution explains the stockholders' equity, the treasury stock component and the components of paid in capital as it relates to cash collected.