Benedict Company compiled the following financial information as of December 31, 2017: $$\begin{array} { l r }
\text { Service revenue } & \$ 1,120,000 \
\text { Common stock } & 240,000 \
\text { Equipment } & 320,000 \
\text { Operating expenses } & 1,000,000 \
\text { Cash } & 280,000 \
\text { Dividends } & 80,000 \
\text { Supplies } & 40,000 \
\text { Accounts payable } & 160,000 \
\text { Accounts receivable } & 120,000 \
\text { Retained earnings, } 1 / 1 / 17 & 600,000
\end{array}$$ Benedict's stockholders' equity on December 31, 2017 is
A)$840,000.
B)$880,000.
C)$640,000.
D)$960,000.

Question

Benedict Company compiled the following financial information as of December 31, 2017: $$\begin{array} { l r } 
\text { Service revenue } & \$ 1,120,000 \
\text { Common stock } & 240,000 \
\text { Equipment } & 320,000 \
\text { Operating expenses } & 1,000,000 \
\text { Cash } & 280,000 \
\text { Dividends } & 80,000 \
\text { Supplies } & 40,000 \
\text { Accounts payable } & 160,000 \
\text { Accounts receivable } & 120,000 \
\text { Retained earnings, } 1 / 1 / 17 & 600,000
\end{array}$$ Benedict's stockholders' equity on December 31, 2017 is
A)$840,000.
B)$880,000.
C)$640,000.
D)$960,000.

Quizplus · Accepted Answer

Stockholders' equity is calculated as: Retained earnings (beginning) + Net income - Dividends + Common stock. Net income = Service revenue - Operating expenses = $1,120,000 - $1,000,000 = $120,000. Stockholders' equity = $600,000 + $120,000 - $80,000 + $240,000 = $880,000.

Benedict Company Compiled the Following Financial Information as of December