Gulf Waterworks Corporation provides plumbing services. Transactions during the first year of operations are given below.
a. Received $4,000 cash and issued common stock to Jason Robinson.
B. Paid $2,000 cash for equipment to be used for plumbing repairs.
C. Borrowed $26,000 from a local bank and deposited the money in the checking account.
D. Paid $800 rent for the year.
E. Purchased $800 of office supplies on account.
F. Completed a plumbing repair project for a local lawyer and received $3,500 cash.
Calculate the amount of total stockholders' equity at the end of the first year after recording the transactions. Assume office supplies of $800 are left at the end of the year.

Question

Gulf Waterworks Corporation provides plumbing services. Transactions during the first year of operations are given below. 
a. Received $4,000 cash and issued common stock to Jason Robinson.
B. Paid $2,000 cash for equipment to be used for plumbing repairs.
C. Borrowed $26,000 from a local bank and deposited the money in the checking account.
D. Paid $800 rent for the year.
E. Purchased $800 of office supplies on account.
F. Completed a plumbing repair project for a local lawyer and received $3,500 cash.
Calculate the amount of total stockholders' equity at the end of the first year after recording the transactions. Assume office supplies of $800 are left at the end of the year.

Quizplus · Accepted Answer

Stockholders' equity initially increases by $4,000 from issuing common stock (a). It does not change with the purchase of equipment (b), borrowing from the bank (c), paying rent (d), purchasing office supplies on account (e), or earning revenue from the plumbing repair project (f), as these transactions affect assets and liabilities but not directly stockholders' equity. However, the net income from the plumbing repair project (revenue of $3,500 without specified expenses directly subtracted here) would increase equity, but since we're not calculating net income directly and no expenses are deducted, we focus on the initial equity increase. The correct calculation for total stockholders' equity considering the given transactions and without explicit expenses would be the initial equity plus any retained earnings, which are not detailed. Thus, the initial increase in equity is the most direct answer, making the correct choice based on the provided information $4,000 + $3,500 (revenue recognized, assuming no expenses) = $7,500. However, given the options, my initial calculation seems to have misinterpreted the options provided. The correct interpretation should consider the net effect of transactions on equity, including the initial investment and the revenue from operations, minus any expenses that would reduce equity, which are not detailed in the options provided. Therefore, without explicit expenses beyond the initial investment and the revenue, the calculation should be reconsidered.

Gulf Waterworks Corporation Provides Plumbing Services