Question

Saira's Maid Service began the year with total assets of $120,000 and stockholders' equity of $40,000. During the year the company earned $90,000 in net income and paid $20,000 in dividends. Total assets at the end of the year were $215,000. How much was stockholders' equity at the end of the year?A. $130,000B. $110,000C. $150,000D. $135,000

Answer 1

Answer:

The correct answer is B. $110,000.

Explanation:

Equity balance mean what a business owes to its owner. The amount invested by owner and net profit earned is part of it is part of equity. Dividend in case of company equals to drawing. It means that equity is net of any dividend payment made by the company.The detail calculation are given below.

Stockholders' equity opening balance         $ 40,000

Year net income                                             $ 90,000

Dividend paid                                                 ($ 20,000)

Stockholders' equity closing balance           $ 110,000