To prepare the stockholders' equity section of the balance sheet, we need to gather the relevant information and organize it properly.
1. Common Stock ($5 stated value): The stated value is $5 per share. The total Common Stock amount is $1,500,000. This means there are 300,000 shares of common stock issued ($1,500,000 / $5).
2. Paid-in Capital in Excess of Par Value—Preferred Stock: The Preferred Stock has a par value of $100 per share. The amount in excess of the par value for the Preferred Stock is $45,000.
3. Paid-in Capital in Excess of Stated Value—Common Stock: The Common Stock has a stated value, not a par value. The amount in excess of the stated value for the Common Stock is $1,050,000.
4. Preferred Stock (8%, $100 par, noncumulative): The Preferred Stock has a par value of $100 per share, and it pays an 8% annual dividend. The total Preferred Stock amount is $500,000.
5. Retained Earnings: The retained earnings amount is $1,134,000.
6. Treasury Stock—Common: There are 8,000 shares of treasury stock for the Common Stock, and the amount is $78,000.
Now, we can prepare the stockholders' equity section of the balance sheet at December 31, 2007:
Stockholders' Equity:
Common Stock ($5 stated value) $1,500,000
Paid-in Capital in Excess of Stated Value—Common Stock $1,050,000
Preferred Stock (8%, $100 par, noncumulative) $500,000
Paid-in Capital in Excess of Par Value—Preferred Stock $45,000
Retained Earnings $1,134,000
Less: Treasury Stock—Common ($78,000)
Total Stockholders' Equity $3,151,000
Note: The treasury stock is deducted from the retained earnings as it represents the cost of repurchased shares.