The controller for Tires and More,Inc.has recorded the following transactions during the month: the company was established by selling 10,000 shares of stock to the public for $20,000 on the 1st of the month;the company recorded $36,000 of revenue for tires and services provided during the month;and expenses of $22,000 were recorded for the month.Additionally,on the last day of the month the company declared dividends of $2,000.What is the balance of Stockholders' Equity at the end of the month,and is the balance a debit or a credit?
A)$32,000 debit.
B)$32,000 credit.
C)$18,000 credit.
D)$36,000 debit.

Question

Quizplus · Accepted Answer

The balance of Stockholders' Equity can be calculated as:

Beginning balance: $20,000 (from the sale of 10,000 shares at $2 per share)
Add: Revenue for the month: $36,000
Less: Expenses for the month: $22,000
Less: Dividends declared: $2,000

Total Stockholders' Equity: $32,000

Since there was beginning balance from the sale of stocks, and revenue increased the equity while expenses and dividends decreased it, the resulting balance is a credit. Therefore, the correct answer is B.

The Controller for Tires and More,Inc