Question

Need help on retained earnings and total stockholder's equity

Mastery Problem: Statement of Cash Flows Championship Boxing, Inc. Championship Boxing, Inc. is a small manufacturer of cardboard boxes of all sizes. You have reported for your first day of work, and the company is in an uproar. Yearly financial statements are being prepared, but a computer malfunction of the company's new BOX-9000 computer has inadvertently erased parts of the company's balance sheet, along with almost all related data except the company's statement of cash flows. The IT department is working to retrieve earlier backups, but estimates that the reconstruction of the data will take about 24 hours. Unfortunately, financial statements are to be presented at a stockholders' meeting in one hour. The company uses the indirect method to prepare its statement of cash flows (rather than the direct method), so your new supervisor believes the missing data for the balance sheet can be prepared using the statement of cash flows. You are assigned this task, since you were top student in your business school class. Meanwhile, the supervisor will go to the stockholders' meeting and give some introductory remarks. In addition to the statement of cash flows, the following data survived the computer mishap: • The investments were sold for $280,000 cash. • Equipment was acquired for $152,080 cash. • Land was acquired for $326,000 cash. • There were no disposals of equipment during the year. • 12,500 shares of common stock were sold for cash during the year. • There was a $96,000 debit to Retained Earnings for cash dividends declared. Statement of Cash Flows Your supervisor has provided you with the following statement of cash flows, prepared using the indirect method. Recall that the statement of cash flows consists of three sections: cash flows from operating activities, cash flows from investing activities, and cash flows from financing activities. Review the statement, and then proceed to the next panel.

Answer 1

Answer

• Total Stockholder’s Equity for 20Y7
  = $ 2045020 total assets - $ 464650 total liabilities
  = $ 1,580,370 [not $ 1580360]
• Total retained Earnings for 20Y7
  = $ 1580370 - $ 100000 common stock - $ 280000 paid in capital in excess
  = $ 1,200,370 [not $ 1200410]