At the beginning of the year (January 1), Buffalo Drilling has $10,000 of common stock outstanding and retained earnings of $7,200. During the year, Buffalo reports net income of $7,500 and pays dividends of $2,200. In addition, Buffalo issues additional common stock for $7,000.

Prepare the statement of stockholders’ equity at the end of the year (December 31)

The preparation of the statement of stockholders’ equity at the end of the year is presented below:

Explanation:

For preparing the statement of stockholders’ equity at the end of the year, first we have to determine the ending retained earning balance which is shown below:

The ending balance of retained earning = Beginning balance of retained earnings + net income - dividend paid

= $7,200 + $7,500 - $2,200

= $12,500

Now the preparation is shown below:

                                       Buffalo Drilling

                       Statement of stockholders’ equity

                     At the end of the year (December 31)

Common stock outstanding    $10,000

Add: retained earning               $12,500

Add: Issued additional

Common stock                          $7,000

Total stockholder equity           $29,500

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