Question

The Baldwin Company currently has the following balances on their balance sheet: Total Assets                        $203,391 Total Liabilities                   $124,185 Retained Earnings            $31,365 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?

Select: 1

$413,941 $319,011 $135,041 $70,641

Answer 1

Balance Sheet of Baldwin Company Currently:-

Shareholder's Equity	Assets
Share Capital: = $203,391- $31,365- $124,185 = $47,841	Total Assets: $203,391
Retained Earnings: $31,365
Liabilities
Total Liabilities: $124,185
Total Liabilities & Shareholder's Equity: $47,841+$31,365+$124,185 = $203,391	Total Assets: $203,391

Balance Sheet of Baldwin Company Next Year:-

Shareholder's Equity	Assets
Share Capital: $47,841 + x	Total Assets: $203,391
Retained Earnings: $31,365+$44,200-$12,000 = $63,565	Change in Total assets: +$55,000
Liabilities
Total Liabilities: $124,185
Total Liabilities & Shareholder's Equity: $47,841+x+$63,565 +$124,185 = $231,591+x	Total Assets: $203,391+$55,000 = $258,391

Therefore to find 'x' we would balance the both side: we get x to be: $22,800

So, the share capital/common share capital increased by $22,800 in next year.

That increase pushed the share capital to : $47,841 + $22,800 = $70,641