Question

York Casting Services started the year with total assets of $110,000 and total liabilities of $50,000. The revenues and the expenses for the year amounted to $140,000 and $50,000, respectively. During the year, the company did not issue any common stock, but it distributed dividends of $70,000. Calculate the amount of increase or decrease in stockholders' equity for the year.

Answer 1

Answer:

Net income:                             $

Revenue                             140,000

Expenses                            (50,000)

Dividend paid                     (70,000)

Net income                         20,000        

Net income is the amount of increase in stockholders' equity.                                                          

Explanation:

Net income is the excess of revenue over expenses and dividend. A positive net income increases the stockholders' equity. Common                                                                                                                                                      stockholders are legal owners of a company, thus, any income not distributed as dividend increases their equity.