Midtown, Inc. had the following transactions in 2018, its first year of operations:

Issued 40,000 shares of common stock. Stock has a par value of $1.00 per share and was issued at $23.00 per share.

Earned net income of $74,000.

Paid no dividends.

At the end of 2018, what is total stockholders' equity?

Total stockholders' equity is $994,000

Explanation:

The total stockholders' equity is made up of common stock par value plus the paid-in capital in excess of par plus net income for the year:

Midtown Inc, Balance sheet extract for the year ended 31st 2018

Common stock par value ($1*40,000) $40,000

Paid-in capital in excess of par ($23-$1) * 40,000 $880,000

net income (retained earnings) $74,000

Total stockholders' equity $994,000

The net income is included because the net income it adds to the retained earnings for the company as the retained earnings belong to the real owners of the business, the stockholders