### 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 = $345,0002. **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

Stockholder's equity at the end of 2021 = Common stock + Paid in capital in excess of par common…

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?

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

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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