Question

A company that uses the accrual method of accounting started the fiscal year with assets of $600,000 and liabilities of $400,000. During the fiscal year, the company recorded credit sales of $250,000, of which $8,000 remained to be collected at year-end, and incurred expenses of $90,000, of which $72,000 was paid in cash. A stock dividend valued at $10,000 was declared and issued to stockholders during the year. What is the year-end balance of total equity?
A. $330,000

B. $360,000

C. $370,000

D. $380,000

Answer 1

Answer:

Option (B) is correct.

Explanation:

Stock dividend do not affect Stockholder's in total.

Beginning equity = Total assets - Total liabilities.

                             = $600,000 - 400,000

                             = $200,000

Net income = Revenues - Expenses

                   = $250,000 - $90,000

                   = $160,000

Ending balance of Equity = Beginning equity + Net income

                                          = $200,000 + $160,000

                                          = $360,000