Capital in excess of par and Retained Earnings?

Hello! I’ve been working on an exercise for one of my classes and I’ve been unable to solve one of the problems, I am given the following information:

Common stock $ 1,600,000

Retained earnings $ 900,000

Net income $ 1,000,000

Shares issued 90,000

Shares outstanding 80,000

Dividends declared and paid $ 800,000

The common stock was sold at a price of $20 per share.

What is the amount of capital in excess of par?

What was the amount of retained earnings at the beginning of the year?

How do I determine capital in excess of par and retained earnings from this information?

Additionally, I tried entering 900,000 for retained earnings but was told by the computer that 900,000 was not the correct answer.

1 Answer

  • Shares Issued 90,000 x $20 = 1,800,000 – 1,600,000 at par value = 200,000 Capital in Excess of Par

    Retained Earnings at end of year – 900,000

    Less Net Income – 1,000,000

    Plus Dividends declared – 800,000

    Retained Earnings, beginning of year – 700,000

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