Answer Happy

Determining the Effects of the Issuance of Common and Preferred Stock Lucas Company was issued a charter by the state of Indiana on January 15 of this year. The charter authorized the following: Common stock, $10 par value, 103,000 shares authorized Preferred stock, 9 percent, par value $8 per share, 4,000 shares authorized During the year, the following transactions took place in the order presented: a. Sold and issued 20,000 shares of common stock at $16 cash per share. b. Sold and issued 3,000 shares of preferred stock at $20 cash per share. c. At the end of the year, the company reported net income of $60,000. No dividends were declared. Required: 1. Prepare the stockholders' equity section of the balance sheet at the end of the year. 2. Assume that you are a common stockholder. If Lucas needed additional capital, would you prefer to have it issue additional common stock or additional preferred stock? Explain.