Ferris Company reported the following on its balance sheet: total contributed capital of $186,000,treasury stock of $19,500 and total stockholder's equity of $237,500.Ferris had 1,000,000 authorized shares of its $0.01 par value common stock of which 200,000 were outstanding. During the following year,Ferris Company earned net income of $75,000,issued 5,000 shares of $1 par common stock at an average market price of $44 per share,and declared dividends of $20,500.What amount was the total stockholder's equity reported on the balance sheet at the end of that year?

Question

Quizplus · Accepted Answer

Beginning of year:
Retained earnings = Total stockholder's equity − Total contributed capital + Treasury stock
= $237,500 − $186,000 + $19,500 = $71,000
Total stockholder's equity = Total contributed capital + Retained earnings − Treasury stock
= $186,000 + $71,000 − $19,500 = $237,500
During the year:
Change in total stockholder's equity = Change in total contributed capital + Change in retained earnings − Change in Treasury stock
= (5,000 shares × issue price of $44 per share)+ ($75,000 of net income − $20,500 of dividends)− $0 = $274,500
End of year:
Total stockholders' equity at end of year = Total stockholders' equity at beginning of year + Change in total stockholders' equity
= $237,500 + $274,500 = $512,000

Ferris Company Reported the Following on Its Balance Sheet: Total