Refer to Lanier Tech. Assume that no dividends were declared or paid during the first year of operations. What is the dollar amount of total stockholders' equity reported on the balance sheet at December 31, 2015?

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Quizplus · Accepted Answer

Total stockholders' equity is calculated as the sum of common stock and retained earnings. From the information provided, we know that Lanier Tech has 10,000 shares of $50 par value common stock outstanding. Therefore, common stock is $500,000 ($50 x 10,000 shares). Retained earnings can be calculated by subtracting total liabilities from total assets, which are provided in the balance sheet as $1,080,000 and $525,000, respectively. Therefore, retained earnings are $555,000 ($1,080,000 - $525,000). Adding common stock and retained earnings, we get total stockholders' equity of $1,055,000 ($500,000 + $555,000). Since no dividends were paid, this is also the amount reported on the balance sheet at December 31, 2015.