Question

A company has the following balances in its stockholders' equity accounts on December 31, Year 1:

Treasury Stock, $650,000;
Common Stock, $400,000;
Preferred Stock, $1,600,000;
Retained Earnings, $1,200,000;
Additional Paid-in Capital, $6,800,000.

Prepare the stockholders' equity section of the balance sheet for the company as of December 31, Year 1. (Amounts to be deducted should be indicated by a minus sign.)

Answer 1

Stockholders' Equity section of the balance sheet

for the company as of December 31, Year 1.

Common stock $400,000

Preferred stock $1,600,000

Add-in Capital $6,800,000

Treasury stock ($650,000)

Retained earnings $1,200,000

Total Stockholder's equity $9,350,000

Step-by-step explanation:

Stockholders Equity Includes the book value of common stock, Preferred stock, Treasury stock and Retained earning.

Common and Treasury Stock are recorded as their issuance value, which include Par value. Add in Capital is the excess of par value, when stock is issued at price above par value.

Treasury stock balance includes the value of own share repurchased by the company. It is a contra equity account and has debit nature.

Retained earning is the balance of accumulated earnings after paying dividends.