Question

What is the total stockholders' equity based on the following account balances?Common Stock $750,000Paid-In Capital in Excess of Par 50,000Retained Earnings 175,000Treasury Stock 25,000a. $1,000,000.b. $975,000.c. $950,000.d. $800,000.

Answer 1

$1,000,000

Step-by-step explanation:

Stockholders' Equity = Common stock + Excess paid-in Capital + Retained Earnings - Treasury stock.

= $750,000 + $50,000 +$175,000 - $25,000

= $1,000,000

Note the following:

Treasury stock refers to the shares that the issuing company buys back; this reduces the number of shares outstanding on the open market. The value of treasury stock is thus deducted while computing the value of Stockholders' Equity.