Question

Elston Company compiled the following financial information as of December 31, 2014:Service revenue$700,000Common stock150,000Equipment200,000Operating expenses625,000Cash175,000Dividends50,000Supplies25,000Accounts payable100,000Accounts receivable75,000Retained earnings, 1/1/14375,000Elston's stockholders' equity on December 31, 2014 isA)$525,000.B)$550,000.C)$400,000.D)$600,000.

Answer 1

Answer:

B)$550,000

Explanation:

Equity will be composed for the sum of common stock and Retained Earnings

We will calcualte the Retained Earnings after closing the temporary accounts:

revenue     700,000

expenses (625,000)

net income  75,000

dividends: 50,000

Adjusted RE

beginning + net income - dividends = ending

375,000 + 75,000 - 50,000 = 400,000

Common Stock         150,000

Retained Earnings    400,000

Total SE                    550,000