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On January 1 of the current year, Jimmy's Sandwich Company reported stockholders’ equity totaling $125,000. During...

On January 1 of the current year, Jimmy's Sandwich Company reported stockholders’ equity totaling $125,000. During the current year, total revenues were $100,000 while total expenses were $89,500. Also, during the current year paid $24,000 in cash dividends. No other changes in equity occurred during the year. If, on December 31 of the current year, total assets are $200,000, the change in total stockholders’ equity during the year was:

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Expert Solution

Equity would be changed with the amount of retained earnings.

Net income = Revenues – Expenses

                   = 100,000 – 89,500

                   = $10,500

Retained earnings = Net income – Cash dividends

                              = 10,500 – 24,000

                              = -$13,500

Answer: Equity decreases by $13,500.

ekkarill92 answered 2 years ago
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