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12 June, 08:23

On January 1, Gucci Brothers Inc. started the year with a $705,000 balance in Retained Earnings and a $608,000 balance in common stock. During the year, the company reported net income of $93,000, paid a dividend of $14,100, and issued more common stock for $22,500. What is total stockholders' equity at the end of the year.

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  1. 12 June, 09:22
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    Stockholder Equity = $1,414,400

    Explanation:

    Stockholder Equity is the owners contribution to a business and it is made up of retained earnings and stock.

    Stockholder Equity = Common stock + Retained Earnings

    Let's track changes in common stock

    Common stock = Starting balance + New stocks issued

    Common stock = 608,000 + 22,500

    Common stock = $630,500

    Changes in retained earnings

    Retained earnings = Starting balance + Income earned - Dividend paid out

    Retained earnings = 705,000 + 93,000 - 14,100

    Retained earnings = $783,900

    Therefore

    Stockholder Equity = 630,500 + 783,900

    Stockholder Equity = $1,414,400
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