North Wind Aviation received its charter during January authorizing the following capital stock:

Preferred stock: 8 percent, par $10, authorized 20,000 shares.
Common stock: par $1, authorized 50,000 shares.

The following transactions occurred during the first year of operations in the order given:

Issued a total of 40,000 shares of the common stock for $15 per share.
Issued 10,000 shares of the preferred stock at $16 per share.
Issued 3,000 shares of the common stock at $20 per share and 1,000 shares of the preferred stock at $16.
Net income for the first year was $48,000, but no dividends were declared.

Required:

Prepare the stockholders’ equity section of the balance sheet at December 31.

To prepare the stockholders' equity section of the balance sheet at December 31 for North Wind Aviation, we need to determine the following components:

1. **Common Stock**: Number of shares issued $\times$ par value per share.
2. **Preferred Stock**: Number of shares issued $\times$ par value per share.
3. **Additional Paid-in Capital (APIC)**: The amount received from issuing stock above par value.
4. **Retained Earnings**: Net income minus any dividends declared (no dividends were declared, so this is just the net income).

Let's calculate these amounts step by step.

### 1. Common Stock
- **Total shares issued**: 40,000 shares at $15 per share + 3,000 shares at $20 per share = 43,000 shares.
- **Par value**: $1 per share.
- **Common stock value**: 43,000 shares $\times$ $1 par value = $43,000.

### 2. Preferred Stock
- **Total shares issued**: 10,000 shares at $16 per share + 1,000 shares at $16 per share = 11,000 shares.
- **Par value**: $10 per share.
- **Preferred stock value**: 11,000 shares $\times$ $10 par value = $110,000.

### 3. Additional Paid-in Capital (APIC)
- **APIC for Common Stock**:
  - 40,000 shares at $15 per share: $(\$15 - \$1) \times 40,000 = \$14 \times 40,000 = \$560,000$.
  - 3,000 shares at $20 per share: $(\$20 - \$1) \times 3,000 = \$19 \times 3,000 = \$57,000$.
  - **Total APIC for Common Stock**: $560,000 + $57,000 = $617,000.

- **APIC for Preferred Stock**:
  - 10,000 shares at $16 per share: $(\$16 - \$10) \times 10,000 = \$6 \times 10,000 = \$60,000$.
  - 1,000 shares at $16 per share: $(\$16 - \$10) \times 1,000 = \$6 \times 1,000 = \$6,000$.
  - **Total APIC for Preferred Stock**: $60,000 + $6,000 = $66,000.

- **Total APIC**: $617,000 (common) + $66,000 (preferred) = $683,000.

### 4. Retained Earnings
- **Net Income**: $48,000 (no dividends declared).

### Stockholders’ Equity Section

**Stockholders' Equity:**

| **Account**                      | **Amount**   |
|----------------------------------|--------------|
| **Preferred Stock (11,000 shares at $10 par)**  | $110,000     |
| **Common Stock (43,000 shares at $1 par)**      | $43,000      |
| **Additional Paid-in Capital**                 |              |
| - Common Stock                                | $617,000     |
| - Preferred Stock                             | $66,000      |
| **Total Additional Paid-in Capital**          | $683,000     |
| **Retained Earnings**                         | $48,000      |
| **Total Stockholders' Equity**                | $884,000     |

### Summary
- **Preferred Stock**: $110,000
- **Common Stock**: $43,000
- **Additional Paid-in Capital**: $683,000
- **Retained Earnings**: $48,000
- **Total Stockholders' Equity**: $884,000

This represents the stockholders' equity section of the balance sheet at December 31.

Do you want more details or have any questions?

Here are some related questions:
1. What is the significance of par value in stock issuance?
2. How would the stockholders’ equity change if dividends were declared?
3. What is Additional Paid-in Capital, and why is it important?
4. How would issuing shares at different prices affect the equity section?
5. What would happen if the company issued bonds instead of stocks?
6. Can you explain the difference between common and preferred stock?
7. How would the equity section look if there was a loss instead of net income?
8. What factors influence a company's decision to issue preferred versus common stock?

**Tip:** Always check if dividends are declared when calculating retained earnings, as this will affect the total stockholders' equity.

Learn how to prepare the stockholders' equity section of the balance sheet for North Wind Aviation. Detailed calculations include common stock, preferred stock, additional paid-in capital (APIC), and retained earnings based on transactions during the first year of operations.

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