Question

At the beginning of the year (January 1), a company has $10,000 of common stock outstanding and retained earnings of $7,200. During the year, the company reports net income of $7,500 and pays dividends of $2,200. In addition, the company issues additional common stock for $7,000.

Required: Prepare the statement of stockholder's equity at the end of the year (December 31)

Answer 1

Explanation:

The preparation of the statement of stockholder's equity at the end of the year (December 31) is presented below:

                                    Statement of stockholder's equity        

Particulars Common stock Retained earnings    Total stockholder  

                                                                                           Equity

Beginning

balance        $10,000                  $7,200                     $17,200

Add: Additional

common stock $7,000                                                   $7,000

Add: Net income                           $7,500                     $7,500

Less - dividend                             -$2,200                    -$2,200

Ending balance  $17,000              $12,500                 $29,500