At September 1, 2015, Promise Ring Co. reported stockholders' equity of $156,000. During the month, Promise Ring generated revenues of $38,000, incurred expenses of $21,000, purchased equipment for $5,000 and paid dividends of $2,000. What is the amount of stockholders' equity at September 30, 2015?

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Quizplus · Accepted Answer

The stockholders' equity increases by the net income (revenues - expenses) and decreases by dividends. Net income is $38,000 - $21,000 = $17,000. Therefore, the equity increases by $17,000 and decreases by $2,000 in dividends, resulting in a net increase of $15,000. The new stockholders' equity is $156,000 + $15,000 = $171,000. The equipment purchase does not affect stockholders' equity directly.