Question

A company reported total Stockholders’ Equity of $540,000 at December 31, 2019, with 120,000 common shares outstanding. During the year ended December 31, 2020, the company reported the following:

3/31/2020- Issued 10,000 shares of $3 par value common stock at $42 per share.

7/1/2020- Purchased for treasury 1,000 shares of $3 par value common stock at $10 per share.

8/31/2020- Incurred an Other Comprehensive Loss of $12,000.

9/30/2020- Paid a cash dividends of $.50 per common share.

Net Income for the year $58,900.

What is the amount of Stockholders’ Equity as of December 31, 2020?

A company reported total Stockholders’ Equity of $540,000 at December 31, 2019, with 120,000 common shares outstanding. During the year ended December 31, 2020, the company reported the following:

3/31/2020- Issued 10,000 shares of $3 par value common stock at $42 per share.

7/1/2020- Purchased for treasury 1,000 shares of $3 par value common stock at $10 per share.

8/31/2020- Incurred an Other Comprehensive Loss of $12,000.

9/30/2020- Paid a cash dividends of $.50 per common share.

Net Income for the year $58,900.

What is the amount of Stockholders’ Equity as of December 31, 2020?

Group of answer choices

$932,400

$938,900

$560,900

$948,900

Answer 1

The amount of Stockholders’ Equity as of December 31, 2020, is $986,900.

Step-by-step explanation:

To calculate the amount of Stockholders’ Equity as of December 31, 2020, we need to take into account the various transactions and events that occurred during the year. Here's a breakdown:

1. Beginning Stockholders’ Equity (December 31, 2019) - $540,000
2. Add: Issuance of 10,000 shares at $42 per share (10,000 × $42) - $420,000
3. Subtract: Purchase of 1,000 shares for treasury at $10 per share (1,000 × $10) - $10,000
4. Add: Net Income for the year - $58,900
5. Subtract: Cash dividends paid ($0.50 per share × 120,000 shares) - $60,000
6. Subtract: Other Comprehensive Loss - $12,000

Calculating the amounts:

• Beginning Stockholders’ Equity ($540,000)
• Additional Paid-In Capital (10,000 × $42) - $420,000
• Treasury Stock (1,000 × $10) - $10,000
• Retained Earnings ($58,900 - $60,000) - ($1,100)
• Other Comprehensive Income - ($12,000)

Summing up these values, the amount of Stockholders’ Equity as of December 31, 2020, is $986,900.

Answer 2

The Stockholders' Equity as of December 31, 2020, is calculated by considering the starting equity, stock issuance, treasury stock transaction, other comprehensive loss, dividends, and net income. The final amount is $902,400.

Step-by-step explanation:

To calculate the amount of Stockholders’ Equity as of December 31, 2020, we need to consider the starting equity, common stock issuance, treasury stock purchase, other comprehensive loss, dividends paid, and net income for the year. Here's the step-by-step calculation:

1. Starting Stockholders' Equity: $540,000.
2. Common stock issued: 10,000 shares at $42 (above the $3 par value) creates additional paid-in capital of (10,000 shares x $42) - (10,000 shares x $3) = $420,000 - $30,000 = $390,000.
3. Treasury stock purchased: 1,000 shares at $10 per share decreases equity by 1,000 shares x $10 = $10,000.
4. Other Comprehensive Loss: -$12,000.
5. Dividends paid: 120,000 original shares + 10,000 issued shares - 1,000 treasury shares = 129,000 shares x $0.50 per share = $64,500.
6. Net Income: +$58,900.

Now, let's add and subtract these from the starting equity:

Ending Stockholders' Equity = $540,000 + $390,000 - $10,000 - $12,000 - $64,500 + $58,900 = $902,400