Question

Power Drive Corporation has the following beginning balances in its stockholders' equity accounts on January 1, 2021: Common Stock, $100,000; Additional Paid-in Capital, $4,500,000; and Retained Earnings, $2,000,000. Net income for the year ended December 31, 2021, is $600,000. Prepare the stockholders' equity section of the balance sheet for Power Drive Corporation as of December 31, 2021.

Answer 1

Answer:

                                   Power Drive Corporation

Stockholders' equity section of the balance sheet as at December 31, 2021

                                                              Amount in $               Amount in $

Stockholder's Equity

Common Stock                                                                           100,000

Additional Paid in-Capital                                                        4,500,000

Retained Earning at beginning            2,000,000

Add: Net income                                      600,000

Total Retained Earnings                                                         2,600,000  

Total Stockholder's Equity                                                    7,200,000

Explanation:

Shareholder's equity represents the amount owed to the owners of the business shown on the balance sheet.

This includes retained earnings (which is the accumulation of the net income/loss over the years less dividends paid), additional paid-in capital and common shares.

Answer 2

Answer:

Total Stockholder's Equity = $7,200,000

Explanation:

                                            Power Drive Corporation

                                              Partial Balance Sheet

                                                As on Dec.31, 2021

Stockholder's Equity:

Common Stock                                                             $100,000

Additional Paid in-Capital                                            $4,500,000

Retained Earning at beginning                   $2,000,000

Add: Net income                                             $600,000

Total Retained Earnings                                             $2,600,000  

Total Stockholder's Equity                                         $7,200,000