The December 31, 2011, balance sheet of Madden Inc., reported total assets of $1,050,000 and total liabilities of $680,000. The following information relates to the year 2012:

The stockholders' equity section of the December 31, 2012, balance sheet would report a balance of

Question

The December 31, 2011, balance sheet of Madden Inc., reported total assets of $1,050,000 and total liabilities of $680,000. The following information relates to the year 2012:

The stockholders' equity section of the December 31, 2012, balance sheet would report a balance of

Quizplus · Accepted Answer

The net income for 2012 is $105,000 (given in the income statement section). Dividends paid are $40,000. Therefore, the increase in retained earnings for 2012 is $65,000 ($105,000 - $40,000). Adding this to the beginning retained earnings balance of $270,000 gives us an ending balance of $335,000. Adding this to the common stock balance of $190,000 gives us a total stockholders' equity balance of $525,000 ($335,000 + $190,000). Therefore, the answer is B.

The December 31, 2011, Balance Sheet of Madden Inc