Question

The Baldwin Company currently has the following balances on their balance sheet:

Total Assets $240,859
Total Liabilities $140,674
Retained Earnings $45,035
Suppose next year the Baldwin Company generates $44,200 in net profit, pays $12,000 in dividends, total assets increase by $55,000, and total liabilities remain unchanged.
What will ending Baldwins balance in Common Stock be next year?

Answer 1

$77,950

Step-by-step explanation:

We know that,

Total assets = Total liabilities + Shareholder equity

where,

Total assets = $240,859 + $55,000 = $295,859

Total liabilities = $140,674

And, the Ending retained earning balance = Beginning balance of retained earnings + net income - dividend paid

= $45,035 + $44,200 - $12,000

= $77,235

Now the shareholder equity would be

= Total assets - total liabilities - ending retained earning balance

= $295,859 - $140,674 - $77,235

= $77,950