Vista Camera Services started the year with total assets of $80,000 and total liabilities of $40,000.The revenues and the expenses for the year amounted to $120,000 and $70,000,respectively.During the year,the company did not issue any common stock,but it distributed dividends of $60,000.
-What is the amount of stockholders' equity at the end of the year?

Question

Quizplus · Accepted Answer

The formula for stockholders' equity is:

Stockholders' equity = Total assets - Total liabilities

Total assets = $80,000
Total liabilities = $40,000

Therefore, stockholders' equity at the beginning of the year = $80,000 - $40,000 = $40,000

Adding the net income (revenues - expenses) to the beginning stockholders' equity gives:

$40,000 + ($120,000 - $70,000) = $90,000

Distributing dividends reduces stockholders' equity, so subtracting dividends gives:

$90,000 - $60,000 = $30,000

Therefore, the answer is C) $30,000.

Vista Camera Services Started the Year with Total Assets of $80,000