Use the following information to answer questions 1 - 13 As of December 31, 2014
ID: 2814835 • Letter: U
Question
Use the following information to answer questions 1 - 13
As of December 31, 2014 assets were $20, liabilities were $12 and paid-in-capital was $1. There was no treasury stock or accumulated other comprehensive income at either the beginning or ending of 2015. During the year revenues were $40, gains (net of losses) were $1, paid-in-capital increased by $2 and the company paid out dividends of $4. At the end of the year, equity was $22 and total liabilities were $20.
1) How much total equity was there on January 1, 2015?
2) How much retained earnings was there at January 1, 2015?
3) How much paid-in-capital was there at December 31, 2015?
Explanation / Answer
(1) Assets = $ 20 and Liabilities = $ 12
Shareholder's Equity = Assets - Liabilities = 20 - 12 = $ 8
Total Equity = Sharholder's Equity = $ 8
(2) Shareholder's Equity = Retained Earnings + Paid-in-Capital + Accumulated Other Comprehensive Income + Treasury Stock
8 = Retained Earnings + 1 + 0 + 0
Retained Earnings = $ 7
(3) During the year the paid-in-capital increased by $ 2 and hence the final paid in capital will be (2+1) = $ 3 at the end of 2015.