Carpenter is the sole stockholder and operator of a consulting firm. At the end
ID: 2338144 • Letter: C
Question
Carpenter is the sole stockholder and operator of a consulting firm. At the end of its accounting period, December 31, 2015, XYZ, Inc. has assets of $400,000 and liabilities of $145,000.
1. Stockholder’s equity on 12/31/2015.
2. The amount and direction (increase or decrease) change in stockholder’s equity if, during 2016, assets increased by $45,000 and liabilities decreased by $10,000.
3. Net income (or net loss) during 2016, assuming that as of December 31, 2016, assets were $410,000, liabilities were $147,000, capital stock of $3,000 was issued, and dividends of $8,000 were paid.
Explanation / Answer
a. Stockholders' Equity as of December 31, 2015 $255,000 Working: Stockholders' Equity = Assets-Liabilities = $400,000 - $145,000 = $255,000 b. Stockholders' Equity as of December 31, 2016 $ 6,31,010 Working: Ending Stockholders Equity = Beginning Stockholders Equity+Increase in Assets+ decrease in Liability = $255,000 + $45,000 + $10,000 = $310,000 c Net Income (or Net Loss) during 2016 $ 3,13,390 Working: Step-1:Stockholders Equity as of December 31, 2016 Stockholder Equity = Assets-Liability = $410,000 - $147,000 = $263,000 Step-2:Calculate Net Income or Net Loss Stockholders Equity-December 2016 $263,000 Stockholders Equity-December 2015 $255,000 Capital Stock ($3,000) Dividends ($8,000) Net Income (or Net Loss) during 2016 $258,000