Suppose next year the Baldwin Company generates $44,200 in net profit, pays $12,000 in dividends, total assets increase by $55,000, and total liabilities remain unchanged. What will ending Baldwins balance in Common Stock be next year?

The ending balance of common stock during next year is $77,477.

Explanation:

Determine the addition to retained earnings.

Addition to retained earnings = Netincome-Dividends

=$44,200-$12,000

=$32,200



Therefore, the addition to retained earnings is $32,200.

It is given that the net income is $44,200. The dividend is $12,000. After settling the dividends, the net income is added to the retained earnings. Thus, $12,000 is deducted from $44,200. Therefore, the addition to retained earnings is $32,200.

Determine the ending balance of common stock during the next year.

Ending balance of commonstock = Total assets-Total liabilities

-Ending retained earnings

= ($230,435+$55,000-$141,660-$66,328)

=$285,435-$141,660-$66,328

=$77,477



Therefore, the ending balance of common stock during the next year is $77,477.

Working notes:

Determine the beginning balance of common stock:

Commonstock = Total assets - Tota liabilities - Retainedearnings

=$230,435-$141,660-$34,128

=$54,647



Therefore, the beginning balance of common stock is $54,647.

Calculate the ending retained earnings:

Ending retained earnings = Retained earnings + Addition to retained earnings

=$34,128+$32,200

=$66,328



Therefore, the ending retained earnings are $66,328.

The ending balance of common stock during next year is $77,477.