What equity accounts are included on the balance sheet of target ?
The correct answer and explanation is:
Answer:
The equity accounts included on the balance sheet of Target Corporation typically include:
- Common Stock
- Additional Paid-In Capital (APIC)
- Retained Earnings
- Accumulated Other Comprehensive Income (Loss)
- Treasury Stock (a contra equity account)
Explanation (300 words):
Equity represents the owners’ residual interest in the assets of a company after deducting liabilities. On Target’s balance sheet, equity accounts reflect the investment made by shareholders plus the company’s accumulated earnings and other comprehensive income components.
- Common Stock: This account represents the par value of shares issued by Target to its shareholders. It shows the basic ownership stake and is usually recorded at the nominal or par value per share multiplied by the number of shares issued.
- Additional Paid-In Capital (APIC): This account reflects the amount investors paid above the par value for the company’s shares. It represents additional capital contributed by shareholders beyond the stock’s nominal value.
- Retained Earnings: This is the accumulated net income that Target has retained (not paid out as dividends) over the years. It is an important equity component because it shows how much profit has been reinvested in the business. Positive retained earnings indicate profitability over time, while negative retained earnings (accumulated deficit) indicate losses.
- Accumulated Other Comprehensive Income (Loss): This includes unrealized gains or losses that are not included in net income, such as foreign currency translation adjustments or unrealized gains/losses on certain investments and hedging activities. This account captures the total comprehensive income that affects equity but bypasses the income statement.
- Treasury Stock: Treasury stock represents shares that the company has repurchased from shareholders. These shares are held by the company and reduce total shareholders’ equity. Treasury stock is a contra equity account and is reported as a negative amount in equity.
Together, these accounts provide a comprehensive picture of Target’s financial health, ownership structure, and how profits have been used over time. They are critical for investors, creditors, and analysts assessing the company’s net worth and financial stability.