Ask Me Help Desk - Common Stock on the Balance Sheet

Quote:

I am working on a project and am stumped on the Retained Earnings and common stock part of the liabilities on the balance sheet.

Let's straighten up that confusion first. Stock and Retained Earnings are part of Equity, not part of Liabilities. So that is a false statement. Liabilities and Equity are the two sections on the right side of the account equation, so one is not part of the other. They are two separate things. (Even though they are both ways of financing a company, but they are still two different things.)

Quote:

25,000 outstanding stock
2,000 shares to be bought
$12.00 Common share price

Shares to be bought? Companies can buy shares in other companies, certainly, but I'm going to make an assumption that you mean shares to be sold/issued, not bought. Because buying shares would be an entirely different type of entry. It helps us understand what you are doing if you make sure you copy the problem exactly right.

Quote:

I recorded:
Common stock 24,000 (2000 x 12)
Retained Earnings 276,000 (23000 x 12)

Is this right?

No. The 2000 x $12 is right. 2000 shares at $12 per share. So there's $24,000 of new common stock. However, I'm not sure where you've gotten the 23,000 from and that has no meaning. Also, stock does not affect retained earnings because they are entirely different ideas. Stock is what is invested into the company by the stockholder/owners. And retained earnings is what the company has earned and not paid out in dividends. Stock isn't earned - it's invested.

Assuming the stock was issued for cash (which you didn't say), then the other side of this entry is Cash. And incoming cash is always a debit. Equity is a credit.

You seem to not be understand the nature of the corporate equity accounts. Feel free to ask whatever of this you aren't understanding, because it'll make the entries a lot easier if you get an understanding of the setup of these new accounts.