On the December 31, y10 Mima Inc. had the following balances in its stockholders

Question

On the December 31, y10 Mima Inc. had the following balances in its stockholders’ equity accounts; Common stock, $50,000 ( 10,000 shares of $5 per value stock); additional paid-in capital, $100,000; and retained earnings, $50,000/.

1. Total shareholder’s equity as of December 31, Y10 is

90,000 b. 200,000 c. 270,000 d. 290,000

During y11, the above company issues 2,000 additional shares of common stock for $15 per share, reported net income of $60,000 and paid in cash dividencds of $20,000.

2. Total shareholder’s equity as of December 31 y11 is:

a. 90,000 b. 200,000   c. 270,000   d. 290,000

Explanation / Answer

1) Answer is OPTION (b) 200,000

2) Answer is OPTION (c) 270,000

The workings are shown below:

Common Paid in Retained Total Stock Capital Ernings Share holders Equity Balance as on 12/31/2010 50000 100000 50000 200000 Issue of shares - 2000 @ $15 10000 20000 30000 Payment of cash dividend -20000 -20000 Net Income 60000 60000 Balance as on 12/31/2011 60000 120000 90000 270000

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