Question

was organized on January 1, 2021. The firm was authorized to issue 200,000 shares of $5 par value common stock. During 2021, Mascha had the following transactions relating to stockholders' equity: Issued 20,000 shares of common stock at $7 per share. Issued 40,000 shares of common stock at $8 per share. Reported a net income of $200,000. Paid dividends of $100,000. Purchased 4,500 shares of treasury stock at $10 (part of the 40,000 shares issued at $8). What is total stockholders' equity at the end of 2021

Answer 1

$655,000

Step-by-step explanation:

The computation of the total stockholder equity at the end of the year is shown below:

Common stock (20,000 shares × $7 + 40,000 share × $8) $460,000

Add: Paid-in capital in excess of par (10,000 shares × $2 + 40,000 shares × $3) $140,000

Add: Retained earnings $100,000

Less: Treasury stock (4,500 shares ×$10 ) ($45,000)

Ending balance of total stockholder equity $655,000

The retained earning is computed below:

= Net income - dividend paid

= $200,000 - $100,000

= $100,000

We simply added the additional paid in capital in excess of par, retained earning and less treasury stock to the common stock so that the ending balance of total stockholder equity could come