The opening balances of capital stock and retained earnings for a company were $2,200,000 and $1,325,000, respectively.During the year, they earned net income of $425,000, the shareholders invested an additional $500,000 for shares and the company paid dividends of $42,000.What was the closing amount of shareholders' equity?
A)$1,708,000
B)$2,208,000
C)$3,908,000
D)$4,408,000

Question

Quizplus · Accepted Answer

The closing amount of shareholders' equity can be calculated by adding the opening balances of capital stock and retained earnings, the net income for the year, and the additional investment by shareholders, then subtracting the dividends paid. This equals $2,200,000 (opening capital stock) + $1,325,000 (opening retained earnings) + $425,000 (net income) + $500,000 (additional investment) - $42,000 (dividends) = $4,408,000.

The Opening Balances of Capital Stock and Retained Earnings for a Company