Question

Roberto Designers was organized on January 1, 2021. The firm was authorized to issue 200,000 shares of $5 par value common stock. During 2021, Roberto 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 4,000 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

Answer:

Roberto designers

20,000 shares at $7 = $140,000

Add:40,000 shares at $8 = $320,000

Less: 4,000 shares at $10 = $40,000

Total common stock holdings = 56,000 shares at $5= $280,000

Premium on shares Account = $140,000

Total shareholders account $420,000

Add closing retained earnings $100,000

Total stockholders equity end of 2021 = $520,000

Retained earnings calculation:

Net income $200,000

Less Dividend $100,000

Closing retained earnings $100,000