At the end of its first month of operations,Michael's Consulting Services reported net income of $25,000.They also had account balances of: Cash,$18,000; Office Supplies,$2,000 and Accounts Receivable $10,000.The sole stockholder's total investment in exchange for common stock for this first month was $5,000.There were no dividends in the first month. Calculate the amount of total equity to be reported on the balance sheet at the end of the month.
A)$30,000
B)$25,000
C)$20,000
D)$5,000
E)$7,000

Question

Quizplus · Accepted Answer

The total equity at the end of the month is calculated by adding the net income to the stockholder's investment, since there were no dividends. This gives $25,000 (net income) + $5,000 (stockholder's investment) = $30,000.

At the End of Its First Month of Operations,Michael's Consulting