Question

Precision camera services started the year with total assets of​ $90,000 and total liabilities of​ $65,000. the revenues and the expenses for the year amounted to​ $100,000 and​ $70,000, respectively. during the​ year, the company did not issue any common​ stock, but it distributed dividends of​ $40,000. what is the amount of​ stockholders' equity at the end of the​ year?

Answer 1

Calculation of the amount of stockholders’ equity at the end of the year;

First, we need to calculate the amount of stockholders’ equity at the beginning of the year with the help of the accounting equation as follows:

Beginning Equity = Beginning Assets – Beginning Liabilities

Beginning Equity  = 90,000-65,000 = $25,000

Now we can calculate the ending equity using the following formula;

Ending Equity = Beginning Equity +Revenues – Expenses – Dividends

Ending Equity =25000+100000-70000-40000 = $15,000

Hence, the amount of stockholders’ equity at the end of the year is $15,000