Question

Jackson Company compiled the following financial information as of December 31, 2014:

Service Revenue $560,000
Common Stock $120,000
Equipment $160,000
Operating Expenses $500,000
Cash $140,000
Dividends $40,000
Supplies $20,000
Accounts Payable $80,000
Accounts Receivable $60,000
Retained Earnings, 1/1/2014 $300,000
What is Jackson’s stockholders’ equity on December 31, 2014?

$440,000
$320,000
$420,000
$480,000

Answer 1

$440,000

Step-by-step explanation:

Net income during year = Service revenue - Operating expenses = $(560,000 - 500,000) = $60,000

Ending retained earnings = Beginning retained earnings + Net income - Dividends

= $(300,000 + 60,000 - 40,000)

= $320,000

Stockholder equity = Common stock + Ending retained earnings = $(120,000 + 320,000) = $440,000