Question

Presented below is the stockholders' equity section of Oaks Corporation at December 31, 2017:

Common stock, par value $20; authorized 75,000 shares;
issued and outstanding 45,000 shares $ 900,000
Paid-in capital in excess of par value 350,000
Retained earnings 500,000
Total : $1,450,000

During 2018 the following transactions occurred relating to stockholders' equity:

3,000 shares were reacquired at $28 per share.
3,000 shares were reacquired at $35 per share.
1,800 shares of treasury stock were sold at $30 per share.

For the year ended December 31, 2016, Oaks reported net income of $450,000. Assuming Oaks accounts for treasury stock under the cost method, what should it report as total stockholders' equity on its December 31, 2018 balance sheet? Remember to adjust for 2018 Net Income.

Answer 1

Statement showing Stockholder Equity
Common stock, par value $20; authorized 75,000 shares;
issued and outstanding 45,000 shares	$900,000
Paid-in capital in excess of par value	$350,000
Paid-in capital in excess of par value - Treasury Stock ( $30-28)X 1800 Share	$3,600
Total Paid in Capital	$1,253,600
Retained earnings (500000+450000)	$950,000
Less: Treasury Share	-$138,600
Total Stock Holder Equity as on 31 Dec 2018	$2,065,000

Working Note:

Computation of Treasury Stock Balance
Accquired 3000 share @ $28	$84,000
Accquired 3000 share @ $35	$105,000
Less: Sold 1800 Treasury Share @28	$50,400
Balance of Treasry Stock	$138,600