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Blossom's Computer Repair Shop started the year with total assets of $315,000 and total liabilities of $215,000
Blossom's Computer Repair Shop started the year with total assets of $315,000 and total liabilities of $215,000. During the year, the business recorded $502,000 in computer repair revenues, $322,000 in expenses, and Blossom paid dividends of $50,800. Blossom's stockholders' equity changed by what amount from the beginning of the year to the end of the year?
a. $129,200
b. $180,000
c. $100,000
d. $299,200
Expert Solution
d. $299,200
We first calculate the amount of equity by applying the formula in the accounting equation
Assets = Liabilities + shareholders' equity
Clearing we have:
shareholders' equity= Assets - Liabilities
shareholders' equity= $315,000 - $215,000 = $100,000
we now calculate the profits that will be part of the shareholders' equity after the payment of the dividend.
| Computer repair revenues | $502,000 |
| Expenses | -$322,000 |
| Less: Net Income | $180,000 |
| Less: Paid Dividens | -$50,800 |
| Profit added to Stockholders' Equity | $129,200 |
| Stockholders' Equity Eating of the year | $100,000 |
| Add: Profit added to Stockholders' Equity | $129,200 |
| Stockholders' Equity at the end of the year | $229,200 |
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