Lerner Company had the following transactions in 2013, its first year of operations. • Issued 20 000 ordinary shares. Shares were issued at $14.00 per share.
• Issued 1 000 preference shares at $100 each.
• Earned net profit of $35 000.
At the end of 2013, what is the total amount of Shareholders' equity?
A)$415 000
B)$380 000
C)$120 000
D)$260 000

Question

Quizplus · Accepted Answer

Shareholders' equity is calculated as the sum of the capital raised from issuing shares and the net profit. Ordinary shares raised $280,000 (20,000 shares x $14), preference shares raised $100,000 (1,000 shares x $100), and the net profit was $35,000. Total shareholders' equity = $280,000 + $100,000 + $35,000 = $415,000.

Lerner Company Had the Following Transactions in 2013, Its First