Packard Company engaged in the following transactions during Year 1, its first year of operations. (Assume all transactions are cash transactions.)1) Acquired $950 cash from the issue of common stock. 2) Borrowed $420 from a bank.
3) Earned $650 of revenues cash.
4) Paid expenses of $250.
5) Paid a $50 dividend.During Year 2, Packard engaged in the following transactions. (Assume all transactions are cash transactions.)1) Issued an additional $325 of common stock.
2) Repaid $220 of its debt to the bank.
3) Earned revenues of $750 cash.
4) Incurred expenses of $360.
5) Paid dividends of $100.
What was the amount of total stockholders' equity on Packard's balance sheet at the end of Year 1?
A) $1,350
B) $900
C) $250
D) $1,300

Question

Quizplus · Accepted Answer

Stockholders' equity at the end of Year 1 is calculated as follows: Initial equity from issuing common stock ($950) + Net income (Revenues $650 - Expenses $250) - Dividends paid ($50) = $950 + $400 - $50 = $1,300.

Packard Company Engaged in the Following Transactions During Year 1