The total equity of Timberlake Company at the beginning of 2013 amounted to $5,500. During 2013 the company reported net income of $1,800 and paid a $500 dividend. If retained earnings at the end of 2013 is $2,200, what was beginning common stock?
A)$3,300
B)$2,800
C)$1,300
D)$4,600

Question

Quizplus · Accepted Answer

During 2013 net income increased retained earnings by $1,800 and dividends decreased retained earnings by $500, a net increase of $1,300. If ending retained earnings is $2,200, beginning retained earnings must have been $1,300 less than that, or $900. With a total of $5,500 in equity at the beginning of the year, common stock must have equaled $4,600 ($5,500 - $900).

The Total Equity of Timberlake Company at the Beginning of 2013