Question

Dab Corporation was organized on January 1, Year 1. During Year 1, Dab had the following transactions relating to shareholders' equity: Issued 28,000 shares of common stock in exchange for cash of $442,400 Reported net income of $98,000 Reported net holding gains on available-for-sale investments in debt securities of $1,000 Paid dividends of $54,000 What is total shareholders’ equity at the end of Year 1?

Answer 1

Answer:

The total shareholders’ equity at the end of Year 1 is $487,400

Explanation:

The computation of the ending total shareholders’ equity is shown below:

= Common stock value in exchange of cash + net income + net holding gains - dividend paid

= $442,400 + $98,000 + $1,000 - $54,000

= $487,400

While calculating the ending balance of shareholder equity we added the net income, net holding gains and deducted the dividend paid to the common stock value amount