Question

The company was organized on January 1, 2021. The firm was authorized to issue 100,000 shares of $3 par value common stock. During 2021, the company had the following transactions relating to stockholders' equity: Issued 10,000 shares of common stock at $7 per share. Issued 40,000 shares of common stock at $8 per share. Reported a net income of $110,000. Paid dividends of $40,000. Purchased 3,000 shares of treasury stock at $9 (part of the 40,000 shares issued at $8). What is total stockholders' equity at the end of 2021?

A. $380,000
B. $393,000
C. $383,000
D. $353,000

Answer 1

Option B: $393,000

Explanation :

As per the data given in the question,

The computation of the total stock holder equity at the end of 2021 is shown below:

Common stock (10,000 × $3 + 40,000 × $3) $150,000

Add: Paid-in capital in excess of par (10,000 × ($7 - $3) + 40,000 × ($8-$3) $200,000

Add: retained earning $70,000 ($110,000 - $40,000)

Less: Treasury stock ($3,000 × 9) $27,000

Stockholder's equity $393,000