Question

At the beginning of 20x5, Poole Inc. had total asset and total liabilities of $600,000 and $275,000, respectively The following occurred during 20X5:

- earned net income of $55,000,
- declare and paid dividends totaling $42,000, and .
- received $18,000 cash from the issuance of new shares of stock Question:
What should be Poole's ending stockholders' equity balance at 12/31/X5?
Answer: $_____ (note: do not use commas, decimals, or cents)

Answer 1

Poole's ending stockholders' equity balance at 12/31/X5 is calculated by taking the starting equity, adding net income, adding cash from new stock issuance, and subtracting dividends paid, resulting in $356,000.

Step-by-step explanation:

To determine Poole's ending stockholders' equity balance at 12/31/X5, we need to factor in the net income, dividends paid, and any new shares issued during 20X5:

• Starting total assets: $600,000
• Starting total liabilities: $275,000
• Starting stockholders' equity can be calculated as total assets minus total liabilities, which is $600,000 - $275,000 = $325,000.
• Net income for 20X5: $55,000 (this increases stockholders' equity).
• Dividends paid: $42,000 (this decreases stockholders' equity).
• Cash from issuance of new stock: $18,000 (this increases stockholders' equity).

The ending stockholders' equity is calculated by summing the starting stockholders' equity, the net income, and the new stock issued, then subtracting the dividends paid:

Ending stockholders' equity = Starting stockholders' equity + Net income + New stock issued - Dividends paid

Ending stockholders' equity = $325,000 + $55,000 + $18,000 - $42,000 = $356,000

Therefore, Poole's ending stockholders' equity balance at 12/31/X5 should be $356,000.