On January 1, 2021 a corporation was organized. The firm was authorized to Issue 150,000 shares of $5 par value common stock. During 2021, the company had the following transactions relating to stockholders' equity: Issued 15,000 shares of common stock at $7 per share. Issued 30,000 shares of common stock at $8 per share. Reported a net income of $150,000. Pald dividends of $75,000. Purchased 4,000 shares of treasury stock at $10 (part of the 30,000 shares issued at $8). What is total stockholders' equlty at the end of 2021?

FINANCIAL ACCOUNTING
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Chapter1: Financial Statements And Business Decisions
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### Understanding Stockholders' Equity Calculation

#### Problem Statement:
On January 1, 2021, a corporation was organized. The firm was authorized to issue 150,000 shares of $5 par value common stock. During 2021, the company had the following transactions relating to stockholders' equity:

1. Issued 15,000 shares of common stock at $7 per share.
2. Issued 30,000 shares of common stock at $8 per share.
3. Reported a net income of $150,000.
4. Paid dividends of $75,000.
5. Purchased 4,000 shares of treasury stock at $10 (part of the 30,000 shares issued at $8).

#### Question:
What is total stockholders' equity at the end of 2021?

#### Options:
1. $875,000.
2. $410,000.
3. $380,000.
4. $725,000.

Let's break down the provided financial transactions to calculate the total stockholders' equity.

### Steps to Calculate Stockholders' Equity:

1. **Issued Stock Calculation:**

   - **First Issuance:**
     - Number of shares issued: 15,000
     - Issuance price per share: $7
     - Total proceeds from issuance: 15,000 shares * $7 = $105,000

   - **Second Issuance:**
     - Number of shares issued: 30,000
     - Issuance price per share: $8
     - Total proceeds from issuance: 30,000 shares * $8 = $240,000

    Total proceeds from both issuances = $105,000 + $240,000 = $345,000

2. **Net Income:**
   - The company reported a net income of $150,000.

3. **Dividends:**
   - Dividends paid amounted to $75,000.

4. **Purchase of Treasury Stock:**
   - Number of shares repurchased: 4,000
   - Repurchase price per share: $10
   - Total cost for treasury stock: 4,000 shares * $10 = $40,000

### Calculation of Stockholders' Equity:

Starting equity from stock issuance:
   - $345,000 
Add: Net Income:
   - +$150,000 
Deduct: Dividends
Transcribed Image Text:### Understanding Stockholders' Equity Calculation #### Problem Statement: On January 1, 2021, a corporation was organized. The firm was authorized to issue 150,000 shares of $5 par value common stock. During 2021, the company had the following transactions relating to stockholders' equity: 1. Issued 15,000 shares of common stock at $7 per share. 2. Issued 30,000 shares of common stock at $8 per share. 3. Reported a net income of $150,000. 4. Paid dividends of $75,000. 5. Purchased 4,000 shares of treasury stock at $10 (part of the 30,000 shares issued at $8). #### Question: What is total stockholders' equity at the end of 2021? #### Options: 1. $875,000. 2. $410,000. 3. $380,000. 4. $725,000. Let's break down the provided financial transactions to calculate the total stockholders' equity. ### Steps to Calculate Stockholders' Equity: 1. **Issued Stock Calculation:** - **First Issuance:** - Number of shares issued: 15,000 - Issuance price per share: $7 - Total proceeds from issuance: 15,000 shares * $7 = $105,000 - **Second Issuance:** - Number of shares issued: 30,000 - Issuance price per share: $8 - Total proceeds from issuance: 30,000 shares * $8 = $240,000 Total proceeds from both issuances = $105,000 + $240,000 = $345,000 2. **Net Income:** - The company reported a net income of $150,000. 3. **Dividends:** - Dividends paid amounted to $75,000. 4. **Purchase of Treasury Stock:** - Number of shares repurchased: 4,000 - Repurchase price per share: $10 - Total cost for treasury stock: 4,000 shares * $10 = $40,000 ### Calculation of Stockholders' Equity: Starting equity from stock issuance: - $345,000 Add: Net Income: - +$150,000 Deduct: Dividends
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