Laramie Corporation was organized on January 3,2015.Laramie was authorized to issue 50,000 shares of common stock with a par value of $10 per share.On January 4,Laramie issued 30,000 shares of common stock at $25 per share.On July 15,Laramie issued an additional 10,000 shares at $20 per share.Laramie reported income of $33,000 during 2015.In addition,Laramie declared a dividend of $.50 per share on December 31,2015.
-See Laramie Corporation information above.The amount reported on Laramie Corporation's December 31,2015,balance sheet as stockholders' equity was
A) $400,000.
B) $550,000.
C) $950,000.
D) $963,000.

Question

Quizplus · Accepted Answer

- The total authorized shares of common stock are 50,000 with a par value of $10 per share, which means the total par value is $500,000.
- On January 4, 30,000 shares were issued at $25 per share, bringing in $750,000 in cash. The difference between the par value and the issue price ($15 per share) is recorded as additional paid-in capital, which adds up to $450,000 (30,000 x $15).
- On July 15, 10,000 shares were issued at $20 per share, bringing in $200,000 in cash. Again, the difference between the par value and the issue price ($10 per share) is recorded as additional paid-in capital, which adds up to $100,000 (10,000 x $10).
- Therefore, the total stockholders' equity can be calculated as follows: 
    - Common stock: $500,000 
    - Additional paid-in capital: $550,000 ($450,000 + $100,000) 
    - Retained earnings: $33,000 
    - Total: $1,083,000 
- However, the question asks for the amount reported on the balance sheet, which needs to account for the dividend declared on December 31. The dividend is calculated as follows: 
    - $0.50 x 40,000 shares (30,000 + 10,000) = $20,000 
- The total stockholders' equity reported on the balance sheet would be: 
    - Common stock: $500,000 
    - Additional paid-in capital: $550,000 
    - Retained earnings: $13,000 ($33,000 - $20,000) 
    - Total: $1,063,000 
- Therefore, the correct answer is D, $963,000.

Laramie Corporation Was Organized on January 3,2015