Question

Question 2 Sunny Company has the following account balances after adjusting entries at December 31, 2012: Accounts Payable $24,000 Dividends 7,000 Treasury Stock, Common (22,000 shares) 98,000 Preferred Stock ($10 par) 80,000 Land 220,000 Cash 220,000 Equipment 120,000 Accounts Receivable 90,000 Common Stock ($1 par) 365,000 Sales 820,000 Prepaid Rent 70,000 Bonds Payable (due 2030) 120,000 Premium on Bonds Payable 8,000 Cost of Goods Sold 720,000 Interest Expense 20,000 Unearned Revenue 20,000 Allowance for Doubtful Accounts 15,000 Operating Expenses 97,000 Accumulated Depreciation- Equipment 40,000 Paid-in Capital in Excess of Par Value, Common 113,000 Retained Earnings 57,000 The total owners' equity on the December 31, 2012 balance sheet would be:

Answer 1

Answer: $380,000

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Calculation of total owner's equity
Preferred Stock	$80,000
Common Stock	$365,000
Paid-in capital in excess of par value - Common stock	$113,000
Retained earnings               [Refer working note 1]	$33,000
	$478,000
Less: Treasury stock	($98,000)
Total owner's equity	$380,000

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Working note 1 - Calculation of ending balance of retained earnings:
Beginning balance of Retained earnings	$57,000
Net loss         [Refer working note 2]	($17,000)
	$40,000
Les: Dividends	$7,000
Beginning balance of Retained earnings	$33,000

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Working note 2 - Calculation of Net Income / (loss)
Revenues:
Sales		$820,000
Expenses:
Cost of Goods Sold	$720,000
Interest Expense	$20,000
Operating Expenses	$97,000
Total expenses		$837,000
Net loss      [$820,000 - $837,000]		($17,000)