Ferris Company reported the following on its balance sheet: total contributed capital of $186,000, treasury stock of $19,500 and total stockholder's equity of $237,500. Ferris had 1,000,000 authorized shares of its $0.01 par value common stock of which 200,000 were outstanding. During the following year, Ferris Company earned net income of $75,000, issued 5,000 shares of $1 par common stock at an average market price of $44 per share, and declared dividends of $20,500. What amount was the total stockholder's equity reported on the balance sheet at the end of that year?

The total stockholder's equity reported on the balance sheet at the end of that year was $512,000

Explanation:

According to the given data we have the following:

Beginning Stockholders’ Equity = $237,500

Net Income = $75,000

Dividends declared = $20,500

In order to calculate the  total stockholders' equity at the end of the year we would have to calculate first the Proceed from Issuance of Common Stock as follows:

Proceed from Issuance of Common Stock = Number of shares issued * Market Price per share

Proceed from Issuance of Common Stock = 5,000 * $44

Proceed from Issuance of Common Stock = $220,000

Therefore, to calculate the total stockholders' equity at the end of the year we would have to use the following formula:

Ending Stockholders’ Equity = Beginning Stockholders’ Equity + Proceed from Issuance of Common Stock + Net Income - Dividends declared

Ending Stockholders’ Equity = $237,500 + $220,000 + $75,000 - $20,500

Ending Stockholders’ Equity = $512,000

The total stockholder's equity reported on the balance sheet at the end of that year was $512,000

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