Question

Houghton Company has the following items: common stock, $1,600,000; treasury stock, $210,000; deferred income taxes, $250,000 and retained earnings, $780,000. What total amount should Houghton Company report as stockholders' equity

Answer 1

Answer:

$2,170,000

Explanation:

Stockholders Equity Includes the book value of common stock, Preferred stock, Treasury stock and Retained earning.

Common stock                     $1,600,000

Treasury stock                      ($210,000)

Retained earnings                $780,000  

Total Stockholder's equity   $2,170,000

Treasury stock balance includes the value of own share repurchased by the company. It is a contra equity account and has debit nature.

Retained earning is the balance of accumulated earnings after apaying dividends.

Deferred income taxes is non equity account so, it is not added in the equity balance