Accounting: What the Numbers Mean
Accounting: What the Numbers Mean
11th Edition
ISBN: 9781259535314
Author: David Marshall, Wayne William McManus, Daniel Viele
Publisher: McGraw-Hill Education
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Chapter 2, Problem 2.1ME
To determine

Concept Introduction:

Accounting Equation:

Accounting equation represents the mathematical relationship between assets, liabilities and equity. According to this equation, assets are equal to the sum of liabilities and equity. The formal for basic accounting equation is as follows:

  Assets = Liabilities + Equity

Stockholder's Equity:

Stockholders Equity includes the paid up amount of all stocks (Common as well as preferred) issued and retained earnings balance. It represents the amount owed to the stockholders by the company. Stockholders Equity is the section of balance sheet's equity part.

To Calculate:

The Total Stockholder's Equity at the end of the year

Expert Solution & Answer
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Answer to Problem 2.1ME

The Total Stockholder's Equity at the end of the year is $54,000

Explanation of Solution

The Total Stockholder's Equity at the end of the year is calculated as follows:

    Beginning Total Assets (A)
    $96,000
    Beginning Total Liabilities (B)
    $54,000
    Beginning Stockholder's Equity (C) =(A-B)
    $42,000
    Net Income (D)
    $16,000
    Dividends (E)
    $ 4,000
    Ending Stockholder's Equity (C+D-E)$54,000

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The ACCOUNTING EQUATION For BEGINNERS; Author: Accounting Stuff;https://www.youtube.com/watch?v=56xscQ4viWE;License: Standard Youtube License