Hello again,
I hope that all are well. Would appreciate if anybody could help me with this.
I note that:
_1)_Ending shareholders’ equity = Beginning shareholders’ equity + Net income + Other comprehensive income - Dividends declared
And,
_2)_Assets = Liabilities + Owners Equity
= Contributed Capital + Beginning Retained Earnings + Net Income – Dividends Declared
Pardon me if this is a little obvious to the smarter ones, but how do these 2 equations reconcile?
From my understanding, Owners’ Equity = Shareholders Equity, so why is Other Comprehensive Income missing from equation (2), while net income and dividends declared still remain?
Where is retained earnings in equation (1)?
Also, shouldn’t total comprehensive income be within Owners Equity component in (2)?
This is to tackle questions like this:.
At the beginning of the year, a company had total shareholders’ equity consisting of ¥200,000 in common share capital and ¥50,000 in retained earnings.
During the year, the following events occurred:
¥
Net income reported
42,000
Dividends paid
7,000
Unrealized loss on available-for-sale investments
3,000
Repurchase of company stock, to be held as Treasury stock
6,000
The total shareholders’ equity at the end of the year is closest to:
A. ¥276,000.
B. ¥279,000.
C. ¥282,000.
Answer = A
ANSWER:
The adjustment for Treasury stock is through the Beginning shareholders’ equity via contributed capital component?