Hi, Can I ask you 1 question, please? How do you calculate to have NET INCOME =

Question

Hi,

Can I ask you 1 question, please? How do you calculate to have NET INCOME = 2638 ????

I tried and I do not know how to have this number = 2638 on the BIG TABLE below.

Please explain for me. Thank you so much.

Statement of Shareholders' Equity

You may use the attached spreadsheet to help you complete this activity, but you are not required to do so. You will find the spreadsheet by clicking on the green Excel icon in the upper left hand corner of the activity.

On January 1, 2016, Powder Company provided the following shareholders' equity section of its balance sheet:

During 2016, the following transactions and events occurred and were properly recorded:

Powder issued 1,800 shares of common stock at $13 per share.

Powder issued 340 shares of preferred stock at $130 per share.

Powder earned net income of $ 38,950.

Powder paid a $7 per share dividend on the preferred stock and a $1 per share dividend on the common stock outstanding at the end of 2016.

Required:

Prepare Powder's statement of shareholders' equity (include retained earnings) for 2016.

Contributed Capital:     Preferred stock, $100 par $ 92,800     Common stock, $5 par 37,400     Additional paid-in capital on preferred stock 21,500     Additional paid-in capital on common stock 58,700     Total contributed capital $210,400 Retained earnings 185,700 Total Shareholders' Equity $396,100

Explanation / Answer

Hence, retained earnings will increase by $20794

$20794 has been presented in the statement of stockholders' equity as under:

We can show either addition to the retained earnings $20794 or its three components preferred dividend $8876, common dividend $9280 and net income 2638.

Kindly give a positive rating if you are satisfied with the answer. Feel free to ask if you have any doubts. Thanks.

Net income of the current year given in the question   38950 Less: preferred dividend - 8876 Less: Common dividend - 9280 Balance transferred to retained earnings 20794

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