Kelly, Incorporated, was issued a charter on January 15, 2009, that authorized the following capital stock:
Common stock, no-par, 103,000 shares.
Preferred stock, 9 percent, par value $8 per share, 4,000 shares.
The board of directors established a stated value on the no-par common stock of $10 per share.
During 2009, the following selected transactions were completed in the order given:
a. Sold and issued 20,000 shares of the no-par 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 2009, the accounts showed net income of $40,000.
1. Prepare the stockholders’ equity section of the balance sheet at December 31, 2009.
2. Assume that you are a common stockholder. If Kelly needed additional capital, would you prefer to have it issue additional common stock or additional preferred stock? Explain.