Midtown,Inc.had the following transactions in 2018,its first year of operations: • Issued 31,000 shares of common stock.Stock has par value of $1.00 per share and was issued at $20.00 per share.
• Earned net income of $70,000.
• Paid no dividends.
At the end of 2018,what is total stockholders' equity?
A) $31,000
B) $690,000
C) $620,000
D) $70,000

Question

Quizplus · Accepted Answer

Total stockholders' equity is calculated by adding the contributed capital and retained earnings. Contributed capital from the stock issuance is $31,000 shares * $20.00 = $620,000. Since no dividends were paid, retained earnings are equal to the net income of $70,000. Therefore, total stockholders' equity is $620,000 + $70,000 = $690,000.