Question

Jamal Company began the year with $75,000 in its Common Stock account and a credit balance in Retained Earnings of $24,000. During the year, the company earned net income of $35,000 and declared and paid $10,000 of dividends. In addition, the company sold additional common stock amounting to $15,000. Based on this information, what is the ending total of stockholders' equity?

Answer 1

Ending balance of stockholders' equity is $139,000.

Step-by-step explanation:

Retained earnings is the retained profit less the dividends paid.

Given,

Retained earnings (beginning balance) = $24,000

Net Income = $35,000

Dividends paid = $10,000

Retained earnings (ending balance) = Retained earnings (beginning balance) + Net Income - Dividends paid

Retained earnings (ending balance) = $24,000 + $35,000 - $10,000

Retained earnings (ending balance) = $49,000

Now, stockholders' equity can be calculated as:

Stockholders' equity (ending balance) = Stockholders' equity (beginning balance) + Retained earnings (ending balance) + Additional common stock (issued)

Stockholders' equity (ending balance) = $75,000 + $49,000 + $15,000

Stockholders' equity (ending balance) = $139,000