At the beginning of Year 2, X Company had assets of $300, liabilities of $150, and common stock of $50. During Year 2, the company earned revenue of $500, incurred expenses of $200, and paid dividends of $50. All transactions were cash transactionsThe amount of total assets reported on X Company's December 31, Year 2 balance sheet would be
A) $550
B) $250
C) $300
D) None of these answers are correct.

Question

Quizplus · Accepted Answer

At the beginning of Year 2, the company's equity was $100 ($300 assets - $150 liabilities). During Year 2, net income was $300 ($500 revenue - $200 expenses), and dividends paid were $50. The increase in equity is $250 ($300 net income - $50 dividends). Therefore, the total assets at the end of Year 2 are $550 ($300 initial assets + $250 increase in equity).

At the Beginning of Year 2, X Company Had Assets