On December 1, 2011, Millstone Corporation invested $45,000 in a new delivery tr

Question

On December 1, 2011, Millstone Corporation invested $45,000 in a new delivery truck. The truck is being depreciated at a monthly rate of $500. During 2011, the company issued stock for $60,000 and declared dividends of $5,000. Its net income in 2011 was $70,000. Millstone's ending Retained Earnings balance as reported in its December 31, 2011, balance sheet was $90,000. Its beginning Capital Stock balance on January 1, 2011, was $200,000.


Determine the total stockholders' equity reported in the company's balance sheet dated December 31, 2011.

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Explanation / Answer

Stockholder's equity section: Stockholder's equity = Capital stock + Retained earnings. Capital stock = Beginning balance + Amount issued during the period                      = $200,000 + 60,000 Capital stock = $260,000 Retained earnings ending balance = $90,000 So stcokholder's equity = $260,000 + $90,000 Stockholder's equity = $350,000 Note: Here we have taken the retained earnings ending balance and didn't consider the net income and dividends since after calculating the retained earnings we get the retained earnings ending balance as follows; Beginning balance of retained earnings    xxxxx Add; net income                                    xxxxx                                                             xxxxxx Less: Dividends                                   xxxxx Retained earnings ending balance   xxxxxx                                                             xxxxxx Less: Dividends                                   xxxxx Retained earnings ending balance   xxxxxx

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