Question

Power Drive Corporation has the following beginning balances in its stockholders' equity accounts on January 1, 2021: Common Stock, $100,000; Additional Paid-in Capital, $4,500,000; and Retained Earnings, $2,000,000. Net income for the year ended December 31, 2021, is $600,000. Prepare the stockholders' equity section of the balance sheet for Power Drive Corporation as of December 31, 2021.

Answer 1

Power Drive Corporation

Stockholders' equity section of the balance sheet as at December 31, 2021

Amount in $ Amount in $

Stockholder's Equity

Common Stock 100,000

Additional Paid in-Capital 4,500,000

Retained Earning at beginning 2,000,000

Add: Net income 600,000

Total Retained Earnings 2,600,000

Total Stockholder's Equity 7,200,000

Step-by-step explanation:

Shareholder's equity represents the amount owed to the owners of the business shown on the balance sheet.

This includes retained earnings (which is the accumulation of the net income/loss over the years less dividends paid), additional paid-in capital and common shares.

Answer 2

Total Stockholder's Equity = $7,200,000

Step-by-step explanation:

Power Drive Corporation

Partial Balance Sheet

As on Dec.31, 2021

Stockholder's Equity:

Common Stock $100,000

Additional Paid in-Capital $4,500,000

Retained Earning at beginning $2,000,000

Add: Net income $600,000

Total Retained Earnings $2,600,000

Total Stockholder's Equity $7,200,000