Question

Assume that a firm had shareholders' equity on the balance sheet at a book value of $1,500 at the end of 2010.During 2011 the firm earns net income of $1,900,pays dividends to shareholders of $200,and issues new stock to raise $500 of capital.The book value of shareholders equity at the end of 2011 is:_______.

A) $2,750
B) $250
C) $1,450
D) $3,700

Answer 1

The book value of shareholders equity at the end of 2011 is:_______.

D) $3,700.

Step-by-step explanation:

a) Data and Calculations:

Beginning shareholders equity book value = $1,500

Net income during 2011 = 1,900

Dividends paid to shareholders (200)

Issuance of new stock 500

Ending shareholders equity book value = $3,700

b) The book value of equity at the end of 2011 is equal to the book value at the beginning of 2011 plus net income generated during 2011, issuance of new stock, minus dividends paid to shareholders.