Question

On January 1, Gucci Brothers Inc. started the year with a $705,000 balance in Retained Earnings and a $608,000 balance in common stock. During the year, the company reported net income of $93,000, paid a dividend of $14,100, and issued more common stock for $22,500. What is total stockholders' equity at the end of the year.

Answer 1

Stockholder Equity= $1,414,400

Step-by-step explanation:

Stockholder Equity is the owners contribution to a business and it is made up of retained earnings and stock.

Stockholder Equity = Common stock + Retained Earnings

Let's track changes in common stock

Common stock= Starting balance + New stocks issued

Common stock= 608,000 + 22,500

Common stock= $630,500

Changes in retained earnings

Retained earnings= Starting balance + Income earned - Dividend paid out

Retained earnings= 705,000 + 93,000- 14,100

Retained earnings= $783,900

Therefore

Stockholder Equity= 630,500+ 783,900

Stockholder Equity= $1,414,400