Presented below is the equity section of Oaks Corporation at December 31, 2010:

For the year ended December 31, 2011, Oaks reported net income of $450,000.Assuming Oaks accounts for treasury under the cost method, what should it report as total equity on its December 31, 2011, statement of financial position?

Question

Presented below is the equity section of Oaks Corporation at December 31, 2010:

For the year ended December 31, 2011, Oaks reported net income of $450,000.Assuming Oaks accounts for treasury under the cost method, what should it report as total equity on its December 31, 2011, statement of financial position?

Quizplus · Accepted Answer

To calculate the total equity on the statement of financial position, we need to consider the following components:

1. Common Stock: $1,000,000
2. Treasury Stock: Oaks Corporation accounts for treasury stock under the cost method. This means the treasury stock is recorded at its cost. We are not given any information about the cost or number of shares of treasury stock, so we assume there was no treasury stock issued or repurchased during the year. Therefore, the treasury stock remains at $0.
3. Additional Paid-in Capital: $800,000
4. Retained Earnings: $600,000 + $450,000 (Net Income for the year) = $1,050,000
5. Accumulated Other Comprehensive Income: $115,000

Total Equity = Common Stock + Additional Paid-in Capital + Retained Earnings + Accumulated Other Comprehensive Income - Treasury Stock
Total Equity = $1,000,000 + $800,000 + $1,050,000 + $115,000 - $0 = $2,965,000

Therefore, the correct choice is A) $1,965,000.

Presented Below Is the Equity Section of Oaks Corporation at December