Question

Lena Company has provided the following data (ignore income taxes):

2014 revenues were $99,000.
2014 expenses were $47,800.
Dividends declared and paid during 2014 totaled $9,500.
Total assets at December 31, 2014, were $177,000.
Total liabilities at December 31, 2014, were $89,000.
Common stock at December 31, 2014, was $28,000.
Which of the following is correct?
a) 2014 net income was $41,700.
b) Total stockholders' equity at December 31, 2014, was $236,000.
c) Retained earnings at December 31, 2014, were $60,000.
d) Retained earnings at December 31, 2014, were $41,700.

Answer 1

The correct calculation of Lena Company's financial figures reveals that the 2014 net income was $51,200. Retained earnings increased by $41,700 after paying dividends. Neither the total stockholders' equity nor the retained earnings match the options given in the question, indicating an error or lack of information.

Step-by-step explanation:

The subject of this question is the calculation of financial figures for Lena Company based on the data provided. Firstly, to ascertain net income, we subtract the expenses from revenues:

$99,000 (revenues) - $47,800 (expenses) = $51,200 (net income).

However, after dividends of $9,500 are paid, the retained earnings increase by the net income minus dividends:

$51,200 (net income) - $9,500 (dividends) = $41,700 (increase in retained earnings).

The total stockholders' equity is the sum of common stock and retained earnings. With the given common stock value of $28,000 and the calculated retained earnings of $41,700, we can calculate total stockholders' equity:

$28,000 (common stock) + $41,700 (retained earnings) = $69,700 (total stockholders' equity).

Considering the above calculations, the correct answer is a) 2014 net income was $51,200 (not $41,700), and since total stockholders' equity is different from the given options, none of the other options are correct as per the provided question.

Lastly, we can assess the claim for total stockholders' equity by subtracting liabilities from total assets:

$177,000 (total assets) - $89,000 (total liabilities) = $88,000 (total stockholders' equity).

Notice, however, that there is a discrepancy here, as the calculated total stockholders' equity does not match the calculated sum of common stock and retained earnings. So, unless there is an error in the data provided or additional information not given, the figures for total stockholders' equity appear inconsistent.