The December 31, Year 4, balance sheet for Deen Company showed total stockholders' equity of $156,000. Total stockholders' equity increased by $65,000 between December 31, Year 4, and December 31, Year 5. During Year 5, Deen Company acquired $20,000 cash from the issue of common stock. The Company paid a $5,000 cash dividend to the stockholders during Year 5. Required Determine the amount of net income or loss Deen reported on its Year 5 income statement. (Hint Remember that stock issues, net income, and dividends all change total stockholders' equity.)
Common stock: These are the shares issued by a company to an outsider. These shares entitle a share of ownership to the person acquired them. The holders of these shares will have voting powers and can elect the board of directors. In the event of liquidation, the holders of these shares will get a right on corporation's assets only after the preferred debts were paid off.
Net profit: It is the profit derived from the business operations during a particular financial year.
Retained earnings: These are the accumulated earnings of the company. These earnings were accumulated over the years of the business made by the company and were not distributed as dividends.
Stockholders’ equity: It is the amount remained in the business after deducting all the liabilities from the assets of the company. It is nothing but the amount invested by the common stockholders and preferred stockholders along with the accumulated profits of the company called retained earnings.
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