Question

At the beginning of 2018, Artichoke Academy reported a balance in common stock of $168,000 and a balance in retained earnings of $68,000. During the year, the company issued additional shares of stock for $58,000, earned net income of $48,000, and paid dividends of $11,800. In addition, the company reported balances for the following assets and liabilities on December 31.
Assets Liabilities
Cash $ 54,400 Accounts payable $ 15,600
Supplies 12,700 Utilities payable 6,000
Prepaid rent 33,000 Salaries payable 5,300
Land 290,000 Notes payable 33,000
Required:
1. Prepare a statement of stockholders’ equity.
2. Prepare a balance sheet.

Answer 1

Answer:

increase in retained earnings = $48,000 - $11,800 = $36,200

increase in common stock = $58,000

Balance sheet

Assets:

Assets  

Cash $54,400  

Supplies $12,700  

Prepaid rent $33,000  

Land $290,000

Total assets                                                     $390,100

Liabilities

Accounts payable $15,600

Utilities payable $6,000

Salaries payable $5,300

Notes payable $33,000

Total liabilities                              $59,900

Equity

Common stock $226,000

Retained earnings $104,200

Total equity                                $330,200

Total liabilities + equity                                   $390,100

Statement of stockholders' equity

Common stock balance Jan. 2018              $168,000

Retained earnings balance Jan. 2018          $68,000

Net income                                                    $58,000

Sub-total                                                       $294,000

Common stocks issued                                $58,000

Distributed dividends                                    ($11,800)

Subtotal                                                        $330,200

Common stock balance Dec. 2018           $226,000

Retained earnings balance Dec. 2018      $104,200