Question

At the beginning of the year (January 1), Buffalo Drilling has $10,000 of common stock outstanding and retained earnings of $7,200. During the year, Buffalo reports net income of $7,500 and pays dividends of $2,200. In addition, Buffalo issues additional common stock for $7,000.

Prepare the statement of stockholders’ equity at the end of the year (December 31)

Answer 1

The preparation of the statement of stockholders’ equity at the end of the year is presented below:

Step-by-step explanation:

For preparing the statement of stockholders’ equity at the end of the year, first we have to determine the ending retained earning balance which is shown below:

The ending balance of retained earning = Beginning balance of retained earnings + net income - dividend paid

= $7,200 + $7,500 - $2,200

= $12,500

Now the preparation is shown below:

Buffalo Drilling

Statement of stockholders’ equity

At the end of the year (December 31)

Common stock outstanding $10,000

Add: retained earning $12,500

Add: Issued additional

Common stock $7,000

Total stockholder equity $29,500