Final answer:
The shareholders' equity of Purdue Corporation as of December 31, 2022, would be $8,468,000, after accounting for the resale of treasury stock, net income, and cash dividends declared during the year.
Step-by-step explanation:
To calculate the shareholders' equity of Purdue Corporation as of December 31, 2022, we must update the equity accounts for the transactions that occurred during 2022.
- Resale of treasury stock: Half of the treasury stock was resold for $258,000. This will increase shareholders' equity by the difference between the resale amount and the recorded cost (which is given as paid-in capital—share repurchase or from treasury stock).
- Net income: Adding $690,000.
- Cash dividends: Declared dividends of $590,000 will reduce retained earnings.
- Stock dividends: Declared small stock dividends of $418,000. Since stock dividends redistribute retained earnings to common stock, they will not affect total shareholders' equity.
Starting shareholders' equity equals the sum of common stock and other paid-in capital accounts ($4,900,000), retained earnings ($3,900,000), and subtracting treasury stock ($690,000) which gives us $8,110,000 as of December 31, 2021. Adjusting for 2022 transactions:
- Add half the resale of treasury stock (assuming the paid-in capital—share repurchase reduces to zero): +$258,000
- Add net income: +$690,000
- Subtract cash dividends: -$590,000
The final shareholders' equity as of December 31, 2022, will be $8,110,000 + $258,000 + $690,000 - $590,000 = $8,468,000.