Question

At December​ 31, 20X1, Suiza Inc. had​ $1,250,000 in assets and​ $630,000 in liabilities. For the year ended December​ 31, 20X1, net income was​ $45,000. During​ 20X1, $10,000 in common stock was​ issued, liabilities decreased​ $10,000, assets increased​ $30,000, and dividends were declared. The only accounts in the​ Stockholders’ Equity section of the balance sheet for Suiza are Common Stock and Retained Earnings. What were total dividends declared during​ 20X1? A. ​$15,000 B. ​$35,000 C. ​$55,000 D. ​$75,000 E. ​$95,000

Answer 1

Answer:

Option (A) is correct.

Explanation:

On January 1st,

Total assets = Total liabilities + share holders equity

                    = 640,000 + 580,000

                    = 1,220,000

On December 31st,

Total assets = Total liabilities + share holders equity

                    = 630,000 + 620,000

                    = 1,250,000

Retained earnings closing = share holders equity increases - common stock issued

                                            = (620,000-580,000) - 10,000

                                            = 40,000 - 10,000

                                            = 30,000

Retained earnings closing = Net income - Dividend declared

30,000 = $45,000 - Dividend declared

Dividend declared = $45,000 - $30,000

                               = $15,000