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Sydney Company had retained earnings of $56,000 and total stockholders’ equity of $75,000 at the beginning of 20X1. During 20X1 the company had net income of $21,000, declared and paid cash dividends of $8,000, and had other comprehensive income of $4,000. Sydney Company neither issued nor bought back shares in 20X1. Compute the retained earnings and total stockholders’ equity at the end of 20X1.

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Answer:

The retained earnings and total stockholders’ equity at the end of 20X1 are $73,000 and $92,000.

Explanation:

The shareholders' equity is made of two components. These are the retained earnings and common stock. Movement in the stockholders' equity is as a result of dividend and retained earnings.

Given;

At the start of the year 20X1,

retained earnings = $56,000

total stockholders’ equity = $75,000

During the year,

net income = $21,000

declared and paid cash dividends = $8,000

other comprehensive income = $4,000

At the end of 20X1,

retained earnings = $56,000 + $21,000 - $8,000 + $4,000

= $73,000

stockholders’ equity = $75,000 + $21,000 - $8,000 + $4,000

= $92,000

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