Question

Indicate how each of the following accounts should be classified in the stockholders’ equity section.

1. Common Stock.
2. Retained Earnings.
3. Paid-in Capital in Excess of Par—Common Stock.
4. Treasury Stock.
5. Paid-in Capital from Treasury Stock.
6. Paid-in Capital in Excess of Stated Value—Common Stock.
7. Preferred Stock.

Short answer

The shareholders' equity component of the balance sheet includes preferred stock, common stock, additional paid-in capital, retained earnings, and treasury stock.

Step-by-step solution

Meaning of Stockholder Equity

The assets left in a company after all liabilities have been paidare stockholders' equity.

This amount is equal to total liabilities minus total assets; alternatively, it is equal to the sum of share capital and retained earnings minus treasury stock.

Classification of Stockholder Equity

1. Common Stock

In the stockholders' equity section, common Stock can be classified as capital stock.

2. Retained Earnings

In the stockholders' equity section, retained earnings can be classed as retained earnings.

3. Paid-in Capital in Excess of Par-Common Stock

In excess of par-common stock, paid-in capital is included in the shareholders' equity section as additional paid-in capital.

4. Treasury Stock

Treasury stock is subtracted from total paid-in capital and retained earnings in the shareholders' equity section.