Answer:
The total shareholders' equity at the end of 2018 is $250,000
Explanation:
The total shareholders' equity at the end of 2018 is
Steps to compute are shown below:
1. Add - Issue of 10,000 shares of common stock = 10,000 × $7 = $70,000 shares
2. Add - Issue of 20,000 shares of common stock = 20,000 × $8 = $160,000 shares
3. Add - net income = $100,000
4. Less - Dividend paid = ($50,000)
5. Less - treasury stock = (3000 × $10) = ($30,000)
So, the total shareholders' equity balance at the end of the year
= $70,000 + $160,000 + $100,000 - $50,000 - $30,000
= $250,000
Since, the issue of shares and net income increase the shareholder wealth whereas dividend and treasury stock decrease in the firm capital. So according to this, the items are added and deducted.
Hence, the total shareholders' equity at the end of 2018 is $250,000
