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.

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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