Assume that a firm had shareholders' equity on the balance sheet at a book value of $1,600 at the end of 2005. During 2006 the firm earns net income of $1,300, pays dividends to shareholders of $600, and uses $300 to repurchase common shares. The book value of shareholders equity at the end of 2006 is:
A) $2,000
B) $400
C) $3,800
D) $2,600

Question

Quizplus · Accepted Answer

The book value of shareholders' equity at the end of 2006 is calculated as: $1,600 (beginning equity) + $1,300 (net income) - $600 (dividends) - $300 (share repurchase) = $2,000.

Assume That a Firm Had Shareholders' Equity on the Balance