Question

Romney's Marketing Company has the following adjusted trial balance at the end of the current year. No dividends were declared. However, 500 shares ($0.10 par value per share) issued at the end of the year for $3,000 are included below:

	Debit	Credit
Cash	$1,500
Accounts Recievable	2,200
Interest Recievable	100
Prepaid Insurance	1,600
Notes Recievable (long term)	2,800
Equipment	15,290
Accumulated Depreciation		$3,000
Accounts Payable		2,400
Accrued Expenses Payable		3,920
Income Taxes Payable		2,700
Unearned Rent Revenue		500
Common Stock (800 shares)		80
Additional Paid-in Capital		3,620
Retained Earnings		2,000
Sales Revenue		38,500
Interest Revenue		100
Rent Revenue		800
Wages Expense	19,500
Depreciation Expense	1,800
Utilities Expense	380
Insurance Expense	750
Rent Expense	9,000
Income Tax Expense	2,700
Total	$57,620	$57,620

Prepare a statement of stockholders' equity in good form for the current year. Please show steps and reasoning! - Thank you!

Answer 1

Stockholder equity should be disclosed in Balance sheet at the end of accounting period, which includes- 1. Share Capital or Common Stock 2. Addition Paid up Capital 3. Retained Earnings
ROMNEY’S MARKETING COMPANY Statement of Stockholders’ Equity For the Year Ended XXXX Amount in $ Total Particulars Common Stock (A) Additional Paid-in Capital (B) Retained Earnings (C ) Stockholders’ Equity (A+B+C) Opening Balance 30 670 2,000 2700    Share issued During the year 50 2,950 3,000    Net income (W.Note-1) 5,270 5,270    Dividends declared                           -   Closing Balance 80 3620 7270 10970 Total Stockholder Equity $10,970 Working Note-1 Income Statement For the year Particulars Amount in $ Operating Revenues: Sales revenue 38500 Total operating revenues (A) 38,500    Operating Expenses:      Wages expense 19,500 Depreciation expense 1,800 Utilities expense 380 Insurance expense 750 Rent expense 9,000 Total operating expenses (B) 31,430 Operating Income C =(A-B) 7,070 Other Income:            Interest revenue 100            Rent revenue 800 Total Other Income (D) 900 Net Income before Tax (C+D) 7,970 Less : Income tax expense 2,700 Net Income 5,270