Question

Yellow Enterprises reported the following ($ in 000s) as of December 31, 2018. All accounts have normal balances. Deficit (debit balance in retained earnings) $ 3,000 Common stock 2,700 Paid-in capital-treasury stock 1,300 Treasury stock at cost 260 Paid-in capital—excess of par 31,500 During 2019 ($ in 000s), net income was $10,300; 25% of the treasury stock was resold for $540; cash dividends declared were $800; cash dividends paid were $430. What ($ in 000s) was shareholders' equity as of December 31, 2018?

Answer 1

Answer:

The shareholders equity as of 31 December, 2018 is $32,240

Explanation:

Here for calculating the shareholders equity we will first have to find the total paid in capital of the Yellow enterprises and after that we will subtract the deficit balance that is remained in the retained earnings account, by doing this we will get the total paid in capital and retained earnings. Now we just have to subtract the treasury stock from the total paid in capital and retained earnings to get the remaining balance , which would be the shareholders equity of the Yellow enterprises.

so first step would be taking out total paid in capital =

                         common stock

                                   +

                         paid in capital(excess of par)

                                   +

                        paid in capital treasury stock

=       2700 + 31,500 + 1300

Total paid in capital = $35,500

Next step is to subtract deficit balance in retained earnings from this to get the total paid in capital and retained earnings =

   total paid in capital - deficit balance in retained earnings

Total paid in capital and retained earnings = $35,500 - $3000

                                                                        = $32,500

Now the last step for taking out shareholders equity we will subtract the treasury stock from the total paid in capital and retained earnings,

Shareholders equity = total paid in capital and retained earnings

                                                          -

                                              treasury stock at cost

                                   = $32,500 - $260

                                    = $32,240