A. 10,200 B. 14,400 C.? Calculate Total Equity at the end of the year for each o
ID: 2399283 • Letter: A
Question
A. 10,200
B. 14,400
C.?
Calculate Total Equity at the end of the year for each of the following companies. Part A) Red Bird Corporation has total equity at the beginning of the year of $4,000. There are no stock issuances during the year. The company has net income of $7,800 and pays out dividends of $1,600. What is the total equity at the end of the year?$ Part B) Fever Company has total equity at the beginning of the year of $5,900. It issues $2,700 of common stock during the year. The company has net income of $7,400 and pays out dividends of $1,600. What is the total equity at the end of the year? $ Part C) Red Bird Inc. has total assets of $14,400 and total liabilities of $4,000 at the beginning of the year. It issues $2,000 of common stock during the year.. The company has net income of $7,500 and pays out dividends of $1,800. What is the total equity at the end of the year? $Explanation / Answer
Solution: A. Total equity at the end of the year 10,200 Working Notes: Equity at beginning $4,000 Addition to retained earnings $6,200 [net income 7,800 - dividend paid 1,600] Total equity at the end of the year $10,200 B. Total equity at the end of the year 14,400 Working Notes: Equity at beginning $5,900 Issuance of new common stock $2,700 Addition to retained earnings $5,800 [net income 7,400 - dividend paid 1,600] Total equity at the end of the year $14,400 C. Total equity at the end of the year 18,100 Working Notes: I Equity at beginning $10,400 II Issuance of new common stock $2,000 III Addition to retained earnings $5,700 IV=I+II+III Total equity at the end of the year $18,100 [ Equity at beginning = Total assets - total liabilities Equity at beginning = $14,400 - $4,000 Equity at beginning = $10,400 Addition to retained earnings = Net income during the period - Dividend paid =$7,500 - $1,800 =5,700 Total equity at the end of the year = Equity at beginning + Issuance equity during the year + Addition to retained earnings =$10,400 + $2,000 + $5,700 =18,100 Please feel free to ask if anything about above solution in comment section of the question.
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