Question

A company has a beginning owner’s capital of $100,000. It has net loss for the current year of $50,000 and paid $10,000 in dividends to shareholders. What is the ending owner’s capital for the company?

Answer 1

Answer:

The ending owner’s capital for the company is $40,000

Explanation:

For computing the ending owner capital, the following equation should be used which is shown below:

Ending owner capital = Beginning owner capital - net loss - dividend paid to shareholders

= $100,000 -- $50,000 - $10,000

= $40,000

The net loss and dividend decrease the owner equity which ultimately decreases the capital. So, we deduct these amounts.

Hence, the ending owner’s capital for the company is $40,000