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23 June, 15:43

Al's Automotive started the year with total assets of $250,000 and total liabilities of $180,000. During the year the business recorded $375,000 in revenues, $200,000 in expenses, and dividends of $35,000. Stockholders' equity at the end of the year wasA : $210,000B : $455,000C : $270,000D : $520,000

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  1. 23 June, 16:33
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    Option A $210,000

    Explanation:

    As we know that:

    Closing Equity = Opening balance + (Revenues - Expenses - Dividends)

    To find closing equity we have to find opening equity and the opening balance is the difference of opening assets and opening liabilities so:

    Opening Total Equity = Opening Total Assets - Opening Total Liabilities

    Putting values we have:

    Opening Equity = $250,000 Op. Assets + $180,000 Op. Liabilities

    = $70,000 Opening Equity

    So putting the value of opening equity we have:

    Closing Equity = $70,000 Opening Equity + ($375,000 Revenue - $200,000 Expenses - $35,000 Dividends)

    = $70,000 + 140,000 Retained Earnings = $210,000 Closing Equity

    So the option A is correct.
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