Ashley's Accessory Shop started the year with total assets of $210,000 and total liabilities of $120,000. During the year the business recorded $330,000 in revenues, $165,000 in expenses, and dividends of $60,000. Stockholders' equity at the end of the year was
A)$180,000.
B)$165,000.
C)$195,000.
D)$105,000.

Question

Quizplus · Accepted Answer

The formula for stockholders' equity is: 
Stockholders' Equity = Total Assets - Total Liabilities
At the beginning of the year, the company's stockholders' equity was: 
$210,000 - $120,000 = $90,000
During the year, the company had revenues of $330,000 and expenses of $165,000, so their net income was: 
$330,000 - $165,000 = $165,000
Then, the company paid out $60,000 in dividends, so their retained earnings for the year were: 
$165,000 - $60,000 = $105,000
Finally, to find the stockholders' equity at the end of the year, we add the retained earnings to the beginning equity: 
$90,000 + $105,000 = $195,000 
Therefore, the correct answer is C, $195,000.

Ashley's Accessory Shop Started the Year with Total Assets of $210,000