{"id":338,"date":"2024-09-06T16:48:50","date_gmt":"2024-09-06T16:48:50","guid":{"rendered":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/chapter\/statement-of-stockholders-equity\/"},"modified":"2024-09-19T14:56:26","modified_gmt":"2024-09-19T14:56:26","slug":"statement-of-stockholders-equity","status":"publish","type":"chapter","link":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/chapter\/statement-of-stockholders-equity\/","title":{"raw":"Statement of Stockholders\u2019 Equity","rendered":"Statement of Stockholders\u2019 Equity"},"content":{"raw":"<section class=\"textbox learningGoals\" aria-label=\"Learning Goals\">\r\n<ul>\r\n \t<li>Recognize the components of stockholder's equity<\/li>\r\n<\/ul>\r\n<\/section>&nbsp;\r\n\r\nAny change in the Common Stock, Retained Earnings, or Dividends accounts affects total stockholders\u2019 equity, and those changes are shown on the <strong>statement of stockholder\u2019s equity<\/strong>.\r\n\r\nStockholders\u2019 Equity can increase in two ways:\r\n<ol>\r\n \t<li>Stock is issued and Common Stock increases, and\/or<\/li>\r\n \t<li>Business makes a profit and Retained Earnings increases.<\/li>\r\n<\/ol>\r\nStockholders\u2019 Equity can decrease in two ways:\r\n<ol>\r\n \t<li>Dividends are distributed and Retained Earnings decreases, and\/or<\/li>\r\n \t<li>Business takes a loss and Retained Earnings decreases.<\/li>\r\n<\/ol>\r\nOf course, in the business world, things can be a bit more complicated than that. Take a look at the most current <a href=\"https:\/\/ir.homedepot.com\/financial-reports\/annual-reports\/recent\" target=\"_blank\" rel=\"noopener\">regulatory reports for The Home Depot, Inc.<\/a>\u00a0On page 36 of the 2019 annual report, the company reports the following changes to stockholders\u2019 equity:\r\n\r\n\r\n<span class=\"u-sr-only\">Single line<\/span><span class=\"u-sr-only\">Single line<\/span><span class=\"u-sr-only\">Single line<\/span>\r\n<table class=\"fin-table acctstatement\">\r\n<thead>\r\n<tr>\r\n<th colspan=\"4\">The Home Depot, Inc.<\/th>\r\n<\/tr>\r\n<tr>\r\n<th colspan=\"4\">Consolidated Statements of Stockholders' Equity<\/th>\r\n<\/tr>\r\n<\/thead>\r\n<tbody>\r\n<tr>\r\n<th><em>in millions<\/em><\/th>\r\n<th scope=\"col\">Fiscal 2019<\/th>\r\n<th scope=\"col\">Fiscal 2018<\/th>\r\n<th scope=\"col\">Fiscal 2017<\/th>\r\n<\/tr>\r\n<tr>\r\n<th><span class=\"u-sr-only\">Subcategory, <\/span><strong>Common Stock:<\/strong><\/th>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r\"><\/td>\r\n<td class=\"r\"><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Balances at the beginning of year<\/th>\r\n<td class=\"r\">$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a089<\/td>\r\n<td class=\"r\">$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a089<\/td>\r\n<td class=\"r\">$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a089<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Shares issued under employee stock plans<\/th>\r\n<td class=\"r\">--<\/td>\r\n<td class=\"r\">--<\/td>\r\n<td class=\"r\">1<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Balance at the end of the year<\/th>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>89<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>89<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>89<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><span class=\"u-sr-only\">Subcategory, <\/span><strong>Paid in Capital:<\/strong><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Balances at the beginning of year<\/th>\r\n<td class=\"r\">10,578<\/td>\r\n<td class=\"r\">10,192<\/td>\r\n<td class=\"r\">9,787<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Shares issued under employee stock plans<\/th>\r\n<td class=\"r\">172<\/td>\r\n<td class=\"r\">104<\/td>\r\n<td class=\"r\">132<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Stock-based compensation expenses<\/th>\r\n<td class=\"r\">251<\/td>\r\n<td class=\"r\">282<\/td>\r\n<td class=\"r\">273<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Balance at the end of the year<\/th>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>11,001<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>10,578<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>10,192<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><span class=\"u-sr-only\">Subcategory, <\/span><strong>Retained Earnings:<\/strong><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Balance at the beginning of the year<\/th>\r\n<td class=\"r\">46,423<\/td>\r\n<td class=\"r\">39,935<\/td>\r\n<td class=\"r\">35,519<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Cumulative effect of accounting changes<\/th>\r\n<td class=\"r\">26<\/td>\r\n<td class=\"r\">75<\/td>\r\n<td class=\"r\">\u2013<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Net earnings<\/th>\r\n<td class=\"r\">11,242<\/td>\r\n<td class=\"r\">11,121<\/td>\r\n<td class=\"r\">8,630<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Cash dividends<\/th>\r\n<td class=\"r\">(5,958)<\/td>\r\n<td class=\"r\">(4,704)<\/td>\r\n<td class=\"r\">(4,212)<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Other<\/th>\r\n<td class=\"r\">(4)<\/td>\r\n<td class=\"r\">(4)<\/td>\r\n<td class=\"r\">(2)<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Balance at the end of the year<\/th>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>51,729<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>46,423<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>39,935<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><span class=\"u-sr-only\">Subcategory, <\/span><strong>Accumulated Other Comprehensive Income (Loss):<\/strong><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Balance at the beginning of the year<\/th>\r\n<td class=\"r\">(772)<\/td>\r\n<td class=\"r\">(566)<\/td>\r\n<td class=\"r\">(867)<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Cumulative effect of accounting changes<\/th>\r\n<td class=\"r\">(31)<\/td>\r\n<td class=\"r\">\u2013<\/td>\r\n<td class=\"r\">\u2013<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Foreign currency translation adjustments<\/th>\r\n<td class=\"r\">53<\/td>\r\n<td class=\"r\">(267)<\/td>\r\n<td class=\"r\">311<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Cash flow hedges, net of tax<\/th>\r\n<td class=\"r\">8<\/td>\r\n<td class=\"r\">53<\/td>\r\n<td class=\"r\">(1)<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Other<\/th>\r\n<td class=\"r\">3<\/td>\r\n<td class=\"r\">8<\/td>\r\n<td class=\"r\">(9)<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Balance at the end of the year<\/th>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>(739)<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>(772)<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>(566)<\/td>\r\n<\/tr>\r\n<tr>\r\n<td><span class=\"u-sr-only\">Subcategory, <\/span><strong>Treasury Stock<\/strong><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<td><\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Balance at the beginning of the year<\/th>\r\n<td class=\"r\">(58,196)<\/td>\r\n<td class=\"r\">(48,196)<\/td>\r\n<td class=\"r\">(40,194)<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">Repurchases of common stock<\/th>\r\n<td class=\"r\">(7,000)<\/td>\r\n<td class=\"r\">(10,000)<\/td>\r\n<td class=\"r\">(8,002)<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Balance at the end of the year<\/th>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>(65,196)<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>(58,196)<\/td>\r\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>(48,196)<\/td>\r\n<\/tr>\r\n<tr>\r\n<th scope=\"row\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Total stockholders' (deficit) equity<\/th>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single line<\/span>$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0(3,116)<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single line<\/span>$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0(1,878)<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single line<\/span>$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a01,454<span class=\"u-sr-only\">Double line<\/span><\/td>\r\n<\/tr>\r\n<\/tbody>\r\n<\/table>\r\n------\r\n<em>Fiscal 2019 and fiscal 2017 include 52 weeks. Fiscal 2018 includes 53 weeks<\/em>\r\n<em>See accompanying notes to consolidated financial statements. <\/em>\r\n\r\nThis might seem intimidating, but you now have the tools to figure this out.\r\n<h2>Common Stock<\/h2>\r\nFirst, the changes to common stock are reported as zero, in millions, which means there could have been $499,999.99 of stock issued left off this report because it is immaterial. From the balance sheet, we learn the stock is $0.05 par value. The $89 million (rounded to the nearest million) in stock would equate to 1.78 billion shares (actually reported on the balance sheet at 1.782 billion).\r\n\r\nIn other words, in fiscal year 2019, there were no significant issues of new common stock. The increase in that account on the statement is $0.\r\n<h2>Paid-in Capital<\/h2>\r\nExcept, we see paid-in capital in excess of par actually increased a bit in 2019 as a result of issuance of new shares. In Note 6 to the financial statements on page 56, we see there were in fact four million shares (rounded) issued to employees as part of their non-cash compensation. A $0.05 par value would be $200,000, well below the rounding limit on these financials. In any case, the increase to owners' equity as a result of additional paid-in capital during 2019 was $11.001 million.\r\n\r\nThese two accounts\u2014common stock and paid-in capital\u2014are the equivalent of the Capital Contribution account we used for a sole proprietorship.\r\n<h2>Retained Earnings<\/h2>\r\n<img class=\"alignright wp-image-5123 \" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/04004257\/finance-4858797_1920-1024x676.jpg\" alt=\"Two business associates shaking hands.\" width=\"400\" height=\"264\" \/>\r\n\r\nAs you might expect, the big changes to retained earnings were net income and dividends. Just as with sole proprietorships and the statement of changes to owner\u2019s equity, the big changes were net income and owner withdrawals. As you may realize by now, a sole proprietor decides when to take money out and how much earnings to withdraw, while a stockholder of a corporation has to wait for the board of directors to declare a dividend (withdrawal of earnings).\r\n\r\nIn short, retained earnings is a company\u2019s accumulated profit since it began operations minus any dividends distributed over that time\u2014just like it sounds: earnings that are retained in the company.\r\n\r\nFor The Home Depot, retained earnings has been retroactively adjusted for a change in accounting principles. Further information on those adjustments can be found on page 43 of the annual report but were mostly due to adopting ASU No. 2016-02 that recognizes a \u201cright-of-use\u201d asset for certain leases, and ASU 2018-02 that moved $31 billion of certain tax effects from Accumulated Other Comprehensive Income to Retained Earnings (see the next section).\r\n<h2>Accumulated Other Comprehensive Income (Loss)<\/h2>\r\nOther comprehensive income includes certain gains and losses excluded from net earnings under GAAP, which consists primarily of foreign currency translation adjustments.\r\n<h2>Treasury Stock<\/h2>\r\nIn the ten years between 2010 and 2020, Home Depot reduced its outstanding shares from 1.7 billion to 1.1 billion and continues to regularly buy back shares on the open market, reducing overall stockholders\u2019 equity by $65 billion.\r\n\r\nAs illustrated by this Home Depot statement, stockholders\u2019 equity equals total paid-in capital plus retained earnings minus treasury stock.\r\n\r\nNow, let\u2019s check your understanding of this topic.\r\n\r\n<section class=\"textbox tryIt\" aria-label=\"Try It\">[ohm2_question hide_question_numbers=1]25230[\/ohm2_question]<\/section>","rendered":"<section class=\"textbox learningGoals\" aria-label=\"Learning Goals\">\n<ul>\n<li>Recognize the components of stockholder&#8217;s equity<\/li>\n<\/ul>\n<\/section>\n<p>&nbsp;<\/p>\n<p>Any change in the Common Stock, Retained Earnings, or Dividends accounts affects total stockholders\u2019 equity, and those changes are shown on the <strong>statement of stockholder\u2019s equity<\/strong>.<\/p>\n<p>Stockholders\u2019 Equity can increase in two ways:<\/p>\n<ol>\n<li>Stock is issued and Common Stock increases, and\/or<\/li>\n<li>Business makes a profit and Retained Earnings increases.<\/li>\n<\/ol>\n<p>Stockholders\u2019 Equity can decrease in two ways:<\/p>\n<ol>\n<li>Dividends are distributed and Retained Earnings decreases, and\/or<\/li>\n<li>Business takes a loss and Retained Earnings decreases.<\/li>\n<\/ol>\n<p>Of course, in the business world, things can be a bit more complicated than that. Take a look at the most current <a href=\"https:\/\/ir.homedepot.com\/financial-reports\/annual-reports\/recent\" target=\"_blank\" rel=\"noopener\">regulatory reports for The Home Depot, Inc.<\/a>\u00a0On page 36 of the 2019 annual report, the company reports the following changes to stockholders\u2019 equity:<\/p>\n<p><span class=\"u-sr-only\">Single line<\/span><span class=\"u-sr-only\">Single line<\/span><span class=\"u-sr-only\">Single line<\/span><\/p>\n<table class=\"fin-table acctstatement\">\n<thead>\n<tr>\n<th colspan=\"4\">The Home Depot, Inc.<\/th>\n<\/tr>\n<tr>\n<th colspan=\"4\">Consolidated Statements of Stockholders&#8217; Equity<\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<th><em>in millions<\/em><\/th>\n<th scope=\"col\">Fiscal 2019<\/th>\n<th scope=\"col\">Fiscal 2018<\/th>\n<th scope=\"col\">Fiscal 2017<\/th>\n<\/tr>\n<tr>\n<th><span class=\"u-sr-only\">Subcategory, <\/span><strong>Common Stock:<\/strong><\/th>\n<td class=\"r\"><\/td>\n<td class=\"r\"><\/td>\n<td class=\"r\"><\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Balances at the beginning of year<\/th>\n<td class=\"r\">$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a089<\/td>\n<td class=\"r\">$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a089<\/td>\n<td class=\"r\">$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a089<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Shares issued under employee stock plans<\/th>\n<td class=\"r\">&#8212;<\/td>\n<td class=\"r\">&#8212;<\/td>\n<td class=\"r\">1<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Balance at the end of the year<\/th>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>89<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>89<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>89<\/td>\n<\/tr>\n<tr>\n<td><span class=\"u-sr-only\">Subcategory, <\/span><strong>Paid in Capital:<\/strong><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Balances at the beginning of year<\/th>\n<td class=\"r\">10,578<\/td>\n<td class=\"r\">10,192<\/td>\n<td class=\"r\">9,787<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Shares issued under employee stock plans<\/th>\n<td class=\"r\">172<\/td>\n<td class=\"r\">104<\/td>\n<td class=\"r\">132<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Stock-based compensation expenses<\/th>\n<td class=\"r\">251<\/td>\n<td class=\"r\">282<\/td>\n<td class=\"r\">273<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Balance at the end of the year<\/th>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>11,001<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>10,578<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>10,192<\/td>\n<\/tr>\n<tr>\n<td><span class=\"u-sr-only\">Subcategory, <\/span><strong>Retained Earnings:<\/strong><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Balance at the beginning of the year<\/th>\n<td class=\"r\">46,423<\/td>\n<td class=\"r\">39,935<\/td>\n<td class=\"r\">35,519<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Cumulative effect of accounting changes<\/th>\n<td class=\"r\">26<\/td>\n<td class=\"r\">75<\/td>\n<td class=\"r\">\u2013<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Net earnings<\/th>\n<td class=\"r\">11,242<\/td>\n<td class=\"r\">11,121<\/td>\n<td class=\"r\">8,630<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Cash dividends<\/th>\n<td class=\"r\">(5,958)<\/td>\n<td class=\"r\">(4,704)<\/td>\n<td class=\"r\">(4,212)<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Other<\/th>\n<td class=\"r\">(4)<\/td>\n<td class=\"r\">(4)<\/td>\n<td class=\"r\">(2)<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Balance at the end of the year<\/th>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>51,729<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>46,423<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>39,935<\/td>\n<\/tr>\n<tr>\n<td><span class=\"u-sr-only\">Subcategory, <\/span><strong>Accumulated Other Comprehensive Income (Loss):<\/strong><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Balance at the beginning of the year<\/th>\n<td class=\"r\">(772)<\/td>\n<td class=\"r\">(566)<\/td>\n<td class=\"r\">(867)<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Cumulative effect of accounting changes<\/th>\n<td class=\"r\">(31)<\/td>\n<td class=\"r\">\u2013<\/td>\n<td class=\"r\">\u2013<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Foreign currency translation adjustments<\/th>\n<td class=\"r\">53<\/td>\n<td class=\"r\">(267)<\/td>\n<td class=\"r\">311<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Cash flow hedges, net of tax<\/th>\n<td class=\"r\">8<\/td>\n<td class=\"r\">53<\/td>\n<td class=\"r\">(1)<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Other<\/th>\n<td class=\"r\">3<\/td>\n<td class=\"r\">8<\/td>\n<td class=\"r\">(9)<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Balance at the end of the year<\/th>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>(739)<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>(772)<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>(566)<\/td>\n<\/tr>\n<tr>\n<td><span class=\"u-sr-only\">Subcategory, <\/span><strong>Treasury Stock<\/strong><\/td>\n<td><\/td>\n<td><\/td>\n<td><\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Balance at the beginning of the year<\/th>\n<td class=\"r\">(58,196)<\/td>\n<td class=\"r\">(48,196)<\/td>\n<td class=\"r\">(40,194)<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">Repurchases of common stock<\/th>\n<td class=\"r\">(7,000)<\/td>\n<td class=\"r\">(10,000)<\/td>\n<td class=\"r\">(8,002)<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Balance at the end of the year<\/th>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>(65,196)<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>(58,196)<\/td>\n<td class=\"r line-single\"><span class=\"u-sr-only\">Single line<\/span>(48,196)<\/td>\n<\/tr>\n<tr>\n<th scope=\"row\">\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0Total stockholders&#8217; (deficit) equity<\/th>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single line<\/span>$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0(3,116)<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single line<\/span>$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0(1,878)<span class=\"u-sr-only\">Double line<\/span><\/td>\n<td class=\"r line-single line-double\"><span class=\"u-sr-only\">Single line<\/span>$\u00a0\u00a0\u00a0\u00a0\u00a0\u00a01,454<span class=\"u-sr-only\">Double line<\/span><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<p>&#8212;&#8212;<br \/>\n<em>Fiscal 2019 and fiscal 2017 include 52 weeks. Fiscal 2018 includes 53 weeks<\/em><br \/>\n<em>See accompanying notes to consolidated financial statements. <\/em><\/p>\n<p>This might seem intimidating, but you now have the tools to figure this out.<\/p>\n<h2>Common Stock<\/h2>\n<p>First, the changes to common stock are reported as zero, in millions, which means there could have been $499,999.99 of stock issued left off this report because it is immaterial. From the balance sheet, we learn the stock is $0.05 par value. The $89 million (rounded to the nearest million) in stock would equate to 1.78 billion shares (actually reported on the balance sheet at 1.782 billion).<\/p>\n<p>In other words, in fiscal year 2019, there were no significant issues of new common stock. The increase in that account on the statement is $0.<\/p>\n<h2>Paid-in Capital<\/h2>\n<p>Except, we see paid-in capital in excess of par actually increased a bit in 2019 as a result of issuance of new shares. In Note 6 to the financial statements on page 56, we see there were in fact four million shares (rounded) issued to employees as part of their non-cash compensation. A $0.05 par value would be $200,000, well below the rounding limit on these financials. In any case, the increase to owners&#8217; equity as a result of additional paid-in capital during 2019 was $11.001 million.<\/p>\n<p>These two accounts\u2014common stock and paid-in capital\u2014are the equivalent of the Capital Contribution account we used for a sole proprietorship.<\/p>\n<h2>Retained Earnings<\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignright wp-image-5123\" src=\"https:\/\/s3-us-west-2.amazonaws.com\/courses-images\/wp-content\/uploads\/sites\/5107\/2020\/10\/04004257\/finance-4858797_1920-1024x676.jpg\" alt=\"Two business associates shaking hands.\" width=\"400\" height=\"264\" \/><\/p>\n<p>As you might expect, the big changes to retained earnings were net income and dividends. Just as with sole proprietorships and the statement of changes to owner\u2019s equity, the big changes were net income and owner withdrawals. As you may realize by now, a sole proprietor decides when to take money out and how much earnings to withdraw, while a stockholder of a corporation has to wait for the board of directors to declare a dividend (withdrawal of earnings).<\/p>\n<p>In short, retained earnings is a company\u2019s accumulated profit since it began operations minus any dividends distributed over that time\u2014just like it sounds: earnings that are retained in the company.<\/p>\n<p>For The Home Depot, retained earnings has been retroactively adjusted for a change in accounting principles. Further information on those adjustments can be found on page 43 of the annual report but were mostly due to adopting ASU No. 2016-02 that recognizes a \u201cright-of-use\u201d asset for certain leases, and ASU 2018-02 that moved $31 billion of certain tax effects from Accumulated Other Comprehensive Income to Retained Earnings (see the next section).<\/p>\n<h2>Accumulated Other Comprehensive Income (Loss)<\/h2>\n<p>Other comprehensive income includes certain gains and losses excluded from net earnings under GAAP, which consists primarily of foreign currency translation adjustments.<\/p>\n<h2>Treasury Stock<\/h2>\n<p>In the ten years between 2010 and 2020, Home Depot reduced its outstanding shares from 1.7 billion to 1.1 billion and continues to regularly buy back shares on the open market, reducing overall stockholders\u2019 equity by $65 billion.<\/p>\n<p>As illustrated by this Home Depot statement, stockholders\u2019 equity equals total paid-in capital plus retained earnings minus treasury stock.<\/p>\n<p>Now, let\u2019s check your understanding of this topic.<\/p>\n<section class=\"textbox tryIt\" aria-label=\"Try It\"><iframe loading=\"lazy\" id=\"ohm25230\" class=\"resizable\" src=\"https:\/\/ohm.one.lumenlearning.com\/multiembedq.php?id=25230&theme=lumen&iframe_resize_id=ohm25230&source=tnh\" width=\"100%\" height=\"150\"><\/iframe><\/section>\n","protected":false},"author":6,"menu_order":17,"template":"","meta":{"_candela_citation":"[{\"type\":\"original\",\"description\":\"Statement of Stockholdersu2019 Equity\",\"author\":\"Joseph Cooke\",\"organization\":\"Lumen Learning\",\"url\":\"\",\"project\":\"\",\"license\":\"cc-by\",\"license_terms\":\"\"},{\"type\":\"cc\",\"description\":\"\",\"author\":\"Credit Commerce\",\"organization\":\"\",\"url\":\"https:\/\/pixabay.com\/photos\/finance-bank-banking-business-4858797\/\",\"project\":\"\",\"license\":\"cc0\",\"license_terms\":\"https:\/\/pixabay.com\/service\/terms\/#license\"}]","pb_show_title":"on","pb_short_title":"","pb_subtitle":"","pb_authors":[],"pb_section_license":""},"chapter-type":[],"contributor":[],"license":[],"part":321,"module-header":"- Select Header -","content_attributions":[{"type":"original","description":"Statement of Stockholdersu2019 Equity","author":"Joseph Cooke","organization":"Lumen Learning","url":"","project":"","license":"cc-by","license_terms":""},{"type":"cc","description":"","author":"Credit Commerce","organization":"","url":"https:\/\/pixabay.com\/photos\/finance-bank-banking-business-4858797\/","project":"","license":"cc0","license_terms":"https:\/\/pixabay.com\/service\/terms\/#license"}],"internal_book_links":[],"video_content":null,"cc_video_embed_content":{"cc_scripts":"","media_targets":[]},"try_it_collection":null,"_links":{"self":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/338"}],"collection":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters"}],"about":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/types\/chapter"}],"author":[{"embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/users\/6"}],"version-history":[{"count":8,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/338\/revisions"}],"predecessor-version":[{"id":1128,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/338\/revisions\/1128"}],"part":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/parts\/321"}],"metadata":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapters\/338\/metadata\/"}],"wp:attachment":[{"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/media?parent=338"}],"wp:term":[{"taxonomy":"chapter-type","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/pressbooks\/v2\/chapter-type?post=338"},{"taxonomy":"contributor","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/contributor?post=338"},{"taxonomy":"license","embeddable":true,"href":"https:\/\/content.one.lumenlearning.com\/financialaccounting\/wp-json\/wp\/v2\/license?post=338"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}