Question

QUESTION 1 of 10: A corporation sold 100,000 shares of stock when the company was formed at $20 per share. After the first year of
operations the company made a profit of $25,000 and distributed dividends of $.10 per share. What was the total value of stockholder's equity
at the end of the year?

Answer 1

Answer:

option b. $2,000,000.

Step-by-step explanation:Explanation:

Increase in stockholders equity = Number of shares sold * Selling price per share

Increase in stockholders equity = 100,000 shares * $20

Increase in stockholders equity = $2,000,000

Answer 2

Based on the shares sold and the profit made, the total value of stockholder's equity at year end is $2,015,000

The total stockholder value can be found as:

= Value of stock + Net income - Dividends

The Value of stock is:

= 20 x 100,000 shares

= $2,000,000

Dividends:

= 0.10 x 100,000

= $10,000

The total stockholder value is therefore:

= 2,000,000 + 25,000 - 10,000

= $2,015,000

In conclusion, the total stockholder value is $2,015,000

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