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:

  $\text{Assets = Liabilities + Equity}$

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

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