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 $442,400Reported net income of $98,000Reported net holding gains on available-for-sale investments in debt securities of $1,000Paid dividends of $54,000What is total shareholders’ equity at the end of Year 1?please explain how/show work,

Answer 1

Answer:

$487,400

Explanation:

Equity which represents the amount owed to the owners of the business includes retained earnings (which is the accumulation of the net income/loss over the years less dividends paid) and common shares.

The total shareholders’ equity at the end of Year 1

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

= $487,400

Common stock, net gain on available-for-sale investments in debt securities and report net profit increases the shareholder's equity while dividend paid reduces it hence the signs assigned.