Question

Elston Company compiled the following information as of December 31, 2014:Service Revenue $700,000Common Stock $150,000Equipment $200,000Operating Expenses $625,000Cash $175,000Dividends $50,000Supplies $25,000Accounts Payable $100,000Accounts Receivable $75,000Retained Earnings, Jan 1, 2014 $375,000Elston's stockholders' equity on December 31, 2014 is

Answer 1

The Elston's stockholders' equity on December 31, 2014 is $550,000

Step-by-step explanation:

For computing the stockholder equity, first, we have to find out the ending retained earning balance which equals to

= Beginning retained earning balance + Net income - dividend paid

= $375,000 + $75,000 - $50,000

= $400,000

where,

Net income = Service revenue - operating expenses

= $700,000 - $625,000

= $75,000

Now the stockholder equity equals to

= Common stock + ending balance of retained earning

= $150,000 + $400,000

= $550,000