Question

Shell Company's year 5 balance sheet had the following balances: stockholders' equity of 4,600 and liabilities of 3,800. During the next year, assets increased by 300 and liabilities decreased by 150. What was the change in stockholders' equity?

Answer 1

The change in stockholders' equity for Shell Company is an increase of 450, calculated by adding the increase in assets (300) and the decrease in liabilities (-150).

Step-by-step explanation:

The question is asking about the change in stockholders' equity for Shell Company from year 5 to year 6. According to the balance sheet equation, Assets = Liabilities + Stockholders' Equity. If, during the next year, assets increased by 300 and liabilities decreased by 150, then stockholders' equity must have increased by the sum of these two changes to maintain the balance sheet equation.

To find the exact change in stockholders' equity, we can calculate it as follows:Change in assets: +300Change in liabilities: -150Therefore, the change in stockholders' equity is +300 (increase in assets) - (-150) (decrease in liabilities) = 450. This means that the stockholders' equity increased by 450 during the year.The change in stockholders' equity can be calculated by using the formula:Change in Stockholders' Equity = (Ending Stockholders' Equity - Beginning Stockholders' Equity)Given that thebeginning stockholders' equity is $4,600 and the ending stockholders' equity is missing, we need to find the change in stockholders' equity by subtracting the liabilities from the ending stockholders' equity. The liabilities are $3,800, so the change in stockholders' equity is $4,600 - $3,800 = $800.