Question

Blue Fin started the current year with assets of $704,000, liabilities of $352,000 and common stock of $204,000. During the current year, assets increased by $404,000, liabilities decreased by $52,000 and common stock increased by $279,000. There was no payment of dividends to owners during the year.

What was the amount of Blue Fin's change in total stockholders' equity during the year? Multiple Choice
a) $252,000 increase
b) $204000 Increase
c) $456,000 Increase
d) $352,000 increase

Answer 1

The change in Blue Fin's total stockholders' equity during the year is a $456,000 increase. This is calculated by finding the initial and final stockholders' equity and then determining the difference between the two.

Step-by-step explanation:

The question asks about the change in total stockholders' equity during the current year for Blue Fin. To calculate this change, we need to take into account the increases and decreases in assets, liabilities, and common stock.

The formula to compute total stockholders' equity is:

Stockholders' Equity = Assets - Liabilities

At the start of the year, Blue Fin had:

• Assets: $704,000
• Liabilities: $352,000
• Common Stock: $204,000

Changes during the year were:

• Assets increased by $404,000
• Liabilities decreased by $52,000
• Common Stock increased by $279,000

We can calculate the initial stockholders' equity and the final stockholders' equity then, find the change in equity:

1. Initial Stockholders' Equity = $704,000 (Assets) - $352,000 (Liabilities) = $352,000
2. Final Assets = $704,000 + $404,000 = $1,108,000
3. Final Liabilities = $352,000 - $52,000 = $300,000
4. Final Stockholders' Equity = $1,108,000 (Final Assets) - $300,000 (Final Liabilities) = $808,000
5. Change in Stockholders' Equity = $808,000 (Final Equity) - $352,000 (Initial Equity)
6. Change in Stockholders' Equity = $456,000

Hence, the correct answer is c) $456,000 Increase.