Question

Incubus Corporation began with an investment by shareholders of $36,000.

a. In its first year, its income showed a deficit of $6,600. What would the equity section of its balance sheet show at year end? (Negative answers should be indicated by a minus sign. Omit $ sign in your response.)

Common stock	$
Retained earnings
Total Stockholders' Equity	$

b. In the second year, it had income of $16,400 and a dividend of $5,600 was paid. What would the equity section of its balance sheet show at year end?

Common stock	$
Retained earnings
Total Stockholders' Equity	$

c. In the third year, Incubus sold more shares for a value of $18,000, earned income of $11,600, and paid a dividend of $5,600. What would the equity section of its balance sheet show at year end?

Common stock	$
Retained earnings
Total Stockholders' Equity	$

Answer 1

a.

Common stock	$36,000
retained earnings	(6,600)
Total stockholders' equity	29,400

b.

common stock	36,000
Retained earnings (-6600 opening balance+16400 income -5600 dividend paid)	4,200
total stockholder's equity	40,200

c.

common stock (36,000+18,000)	54,000
retained earnings (4200 opening balance +11600 net income -5600 dividend)	10,200
total stockholder's equity	64,200