Question

Presented below is the stockholders' equity section of Oaks Corporation at December 31, 2015:

Common stock, par value $20; authorized 75,000 shares;
issued and outstanding 45,000 shares $ 900,000
Paid-in capital in excess of par value 250,000
Retained earnings 300,000
$1,450,000
During 2016 the following transactions occurred relating to stockholders' equity:
3,000 shares were reacquired at $28 per share.
3,000 shares were reacquired at $35 per share.
1,800 shares of treasury stock were sold at $30 per share.
For the year ended December 31, 2016, Oaks reported a net income of $450,000. Assuming Oaks accounts for treasury stock under the cost method, what should it report as total stockholders' equity on its December 31, 2016, balance sheet?

Answer 1

$1,765,000

Step-by-step explanation:

The computation of total stockholders' equity is shown below:-

Common stock = $900,000

Paid-in capital in excess of par value = $250,000

Paid-in capital from treasury stock

=1,800 × ($30 -$28)

= $3,600

Retained earnings

= $300,000+ $450,000

= $750,000

Treasury stock

= (1,200 × $28) + (3,000 × $35)

= $138,600

Total stockholders' equity = Common stock + Paid-in capital in excess of par value + Paid-in capital + Retained earnings - Treasury stock

= $900,000 + $250,000 + $3,600 + $750,000 + $138,600

= $1,765,000