Question

Stahl Consulting started the year with total assets of $20,000 and total liabilities of $5,000. During the year, the business recorded $16,000 in catering revenues and $10,000 in expenses. Stahl issued stock of $3,000 and paid dividends of $5,000 during the year. Stockholders' equity changed by what amount from the beginning of the year to the end of the year?Select one:A. $3,000.B. $1,000.C. $15,000.D. $4,000.

Answer 1

Answer:

D. $4,000.

The Stockholders' equity increase by two items, one is the issued stock of $3,000 that increase equity and cash in assets part, and the result before dividends of $1,000 that increase retained earnings in the equity part and cash in the assets part.

The Net income of the year was $6,000 but were paid in dividends -$5,000, so the retained earnings is $1,000

Explanation:

                                    START END

TOTAL ASSETS        $20,000   $24,000  

TOTAL LIABILITIES       $5,000   $5,000  

Common Stock                           $3,000  

Retained Earnings                   $1,000  

Capital                      $15,000   $15,000

TOTAL EQUITY      $15,000   $19,000

Income Statement  

Sales  $16,000  

Cost of goods sold -$10,000  

Gross Profit  $6,000  

Dividends -$5,000  

                  $1,000