The revenues and expenses of Paradise Travel Service for the year ended May 31, 20Y6, follow: Fees earned $900,000
Office expense 300,000
Miscellaneous expense 15,000
Wages expense 450,000
Everett McCauley invested an additional $40,000 in the business in exchange for common stock, and $10,000 of dividends were paid during the year. Common stock had a balance of $60,000 and retained earnings had a balance of $300,000 as of June 1, 20Y5.
Prepare a statement of stockholders’ equity for the year ended May 31, 20Y6. How is the issued common stock found?

Common Stock 100,000

Retained Earnings 425,000

Total 525,000

Explanation:

Paradise Travel Service Statement of Net Income

Fees Earned : 900,000

Less Office Expense : (300,000)

Less Miscelleaneous Expenses :( 15,000)

Less Wages expense (450,000)

Net Earnings 135,000

Paradise Travel Service statement of stockholders’ equity for the year ended May 31, 20Y6

Common stock Retained Earning Total

Balance Jan 1 60,000 300,000 360,000

Additional Invested capital

40,000 - 40,000

Net Income :

- $135,000 $135,000

Less Dividends paid

- ($10,000) ($10,000)

Balance, May 31 20y6

100000 425000 525000

Common Stock 100,000

Retained Earnings 425,000

Total 525,000

(a) when insurance is obtained through a reciprocal insurer, the insureds are sharing the risk of loss with other subscribers of that reciprocal.

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