Mica inc.began operations in October, 2011.During October, Mica sold ordinary shares for €200,000, earned revenue of €22,000, incurred expenses of €12,000, and paid dividends of €1,000.Equity at the end of the month is

Question

Quizplus · Accepted Answer

At the beginning of the month, the company had no equity, so its equity at the end of the month will be equal to its net income for the month plus the amount of funds raised from issuing shares.

Net income for the month is equal to revenue minus expenses minus dividends:
€22,000 - €12,000 - €1,000 = €9,000

Adding the funds raised from issuing shares (€200,000), we get:
€9,000 + €200,000 = €209,000

Therefore, the equity at the end of the month is €209,000.

Mica IncBegan Operations in October, 2011