Question

At the beginning of the year (January 1), Buffalo Drilling has $10,000 of common stock outstanding and retained earnings of $7,500. During the year, Buffalo reports net income of $7,800 and pays dividends of $2,500. In addition, Buffalo issues additional common stock for $7,300. Required: Prepare the statement of stockholders' equity at the end of the year (December 31).

Answer 1

The statement of stockholders' equity for Buffalo Drilling at year-end will show common stock of $17,300 and retained earnings of $12,800, totaling $30,100 in stockholders' equity.

Step-by-step explanation:

Statement of Stockholders' Equity

To prepare the statement of stockholders' equity for Buffalo Drilling at the end of the year, one must perform a few calculations to determine the changes in the equity accounts throughout the year. The opening balances of common stock and retained earnings and the transactions during the year will be included.

At the beginning of the year:

• Common stock: $10,000
• Retained earnings: $7,500

Changes during the year:

• Net income: +$7,800
• Dividends paid: -$2,500
• Issue of additional common stock: +$7,300

Ending balances on December 31 will be:

• Common stock: $10,000 + $7,300 = $17,300
• Retained earnings: $7,500 + $7,800 (net income) - $2,500 (dividends) = $12,800

So the statement of stockholders' equity will show:

• Common stock: $17,300
• Retained earnings: $12,800

The total stockholders' equity at the end of the year will be the sum of common stock and retained earnings, which amounts to $30,100.

Answer 2

Step-by-step explanation:

For preparing the statement, first we have to compute the ending balance of the common stock and the retained earning

Ending balance of the common stock = Beginning balance + Additional common stock issued

= $10,000 + $7,300

= $17,300

Ending balance of the retained earnings = Beginning balance + Net income - dividend paid

= $7,500 + $7,800 - $2,500

= $12,800

So, the total stockholder equity = Ending balance of the common stock + Ending balance of the retained earnings

= $17,300 + $12,800

= $30,100

The statement of stockholder equity is shown in the spreadsheet. Kindly find the attachment below.