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Shareholders' equity (SE), also known as shareholders' value, both have the same meaning. The term refers to the sum of the value that the owners of a corporation

have left after paying off liabilities or debts. Equity basically refers to the difference between the total resources and total obligations of a company

Working Notes:

Calculation of Retained Earnings

$\begin{array}{rcl}\mathrm{Retained}\mathrm{Earnings}& =& \mathrm{Common}\mathrm{stock}\mathrm{share}脳\mathrm{cash}\mathrm{dividend}\mathrm{price}\\ & =& 60,000脳\$1.05\\ & =& 63,000\end{array}$

Working Notes:

Calculation of Retained Earnings

$\begin{array}{rcl}\mathrm{Retained}\mathrm{Earnings}& =& \left(\mathrm{Dividend}\mathrm{Rate}脳\mathrm{Common}\mathrm{stock}\mathrm{share}\right)脳\mathrm{market}\mathrm{price}\mathrm{od}\mathrm{share}\\ & =& \left(10\%脳60,000\right)脳\$14\\ & =& 84,000\end{array}$

Working Notes:

Calculation of Treasury Shares

$\begin{array}{rcl}\mathrm{Treasury}\mathrm{Shares}& =& \mathrm{Required}\mathrm{share}脳\mathrm{market}\mathrm{price}\mathrm{per}\mathrm{share}\\ & =& 2000脳\$15\\ & =& 30,000\end{array}$

Working Notes:

Calculation of Cash amount

$\begin{array}{rcl}\mathrm{Cash}\mathrm{amount}& =& \mathrm{Shares}脳\mathrm{per}\mathrm{shares}\mathrm{value}\\ & =& 1,000脳\$18\\ & =& 18,000\end{array}$

Working Notes:

Calculation of Share capital amount

$\begin{array}{rcl}\mathrm{Share}\mathrm{capital}& =& \mathrm{Common}\mathrm{stock}+\mathrm{outstanding}\mathrm{shres}\\ & =& \$600,000+\$60,000\\ & =& \$660,000\end{array}$

Calculation of Share premium amount

$\begin{array}{rcl}\mathrm{Share}\mathrm{premium}& =& \mathrm{Paid}-\mathrm{in}\mathrm{capital}\mathrm{in}\mathrm{excess}\mathrm{of}\mathrm{par}+\mathrm{Share}\mathrm{premium}\mathrm{ordinary}+\mathrm{Share}\mathrm{premium}\mathrm{treasury}\\ & =& \$500,000+24,000+3,000\\ & =& \$527,000\\ & & \end{array}$

Calculation of Retained Earnings

$\begin{array}{rcl}\mathrm{Retained}\mathrm{Earnings}\mathrm{Amount}& =& (\mathrm{Cjhange}\mathrm{in}\mathrm{the}\mathrm{value}\mathrm{of}\mathrm{retained}\mathrm{eaarnings})+\mathrm{met}\mathrm{income}\\ & =& (\$620,000-\$63,000-\$84,000)+370,000\\ & =& \$843,000\end{array}$

Calculation of Treasury Shares

$\begin{array}{rcl}\mathrm{Treasury}\mathrm{shares}& =& \mathrm{Treasury}\mathrm{shares}\mathrm{issued}-\mathrm{Treasury}\mathrm{shares}\mathrm{paid}\\ & =& \$30,000-\$15,000\\ & =& \$15,000\end{array}$

Analysis of Payout Ratio

$\begin{array}{rcl}\mathrm{Payout}\mathrm{ratio}& =& \frac{\mathrm{Total}\mathrm{dividend}}{\mathrm{Net}\mathrm{income}}\\ & =& \frac{\$63,000}{\$370,000}\\ & =& 17\%\end{array}$

Analysis of ordinary share equity

$\begin{array}{rcl}\mathrm{Return}\mathrm{on}\mathrm{ordinary}\mathrm{share}\mathrm{equity}& =& \frac{\mathrm{Net}\mathrm{income}}{\mathrm{Average}\mathrm{shareholder}\mathrm{equity}}\\ & =& \frac{\$370,000}{{\displaystyle \frac{\$1,720,000+\$2,105,000}{2}}}\\ & =& 19.3\%\end{array}$

As treasury stock does not fit the definition of an asset, it does not result in gains or losses when it is sold above or below cost. It is rather unissued equity. Furthermore, as share repurchases and reissues are transactions with their own owners, no profits or losses should be recorded; the effect of such transactions should not be reflected in income.