Final answer:
A balance sheet is an accounting tool that lists a company's assets and liabilities. Stockholders' equity represents the residual interest in the assets of a company after deducting liabilities.
Step-by-step explanation:
A balance sheet is an accounting tool that lists a company's assets and liabilities. Assets are things of value that a company owns, such as cash, buildings, and inventory. Liabilities are debts or obligations that a company owes, such as loans and accounts payable.
Stockholders' equity, also known as owners' equity or shareholders' equity, represents the residual interest in the assets of a company after deducting liabilities. It is calculated by subtracting total liabilities from total assets on the balance sheet. In the given information, the stockholders' equity at the beginning of the year (1st January 2022) included capital stock of $120,000.