Question

Assume net income for 2018 is $80,000. Compute total stockholders' equity as of Dec. 31,2018.

uires Respondus LockDown Browser Time Left:0:57:45 Brianna Brown: Attempt 1 Os Question 5 (5 points) Saved Data for the next 3 questions: The following account balances pertain to the dental practice of J. Smith DDS, as of Dec. 31, 2018. Equipment $541,600 Common Stock $408,000 Service Revenue $400,000 Retained Earnings (as of Jan. 1st) $104,000 Cash $80,000 Accounts Payable $87,600 Salaries Expense $132,000 Dividends $72,000 Accounts Receivable $60,000 Dental Supplies Expense $42,000 Dental Supplies $36,000 Rent Expense $24,000 Utilities Expense $12,000 -

Answer 1

Solution:

1) Calculating Stockholders Equity, Assuming net income is $ 80,000.

J. Smith
Balance Sheet (partial)
For the year ended December 31,2018
Stockholder's equity :
Common Stock	$       408,000
Additional Paid in capital
Total Additional Paid in capital	$                  -
Total paid in capital	$       408,000
Retained earnings (Note:a)	$       112,000
Total stockholder's Equity	$       520,000

Note:

a) Calculation of retained earnings

J. Smith
Statement of Retained earnings
For the year ended December 31,2018
Retained earnings, January 1,2018		$        104,000
Add: Net income (Assumed)		$          80,000
Subtotal		$        184,000
(Less): Dividends		$        (72,000)
Retained earnings, December 31,2018		$        112,000

2) Calculating Stockholders Equity without Net Income Assumption.

Total Stockholders Equity can be calculated in 2 ways

1) Total Stockholders Equity = Total Assets - Total Liabilities

2) Total Stockholders Equity = Paid up capital + Retained Earnings.

Here we are following first method, Total Stockholders Equity = Total Assets - Total Liabilities

Calculation of Total Stockholders Equity:

Total Assets	Amount $
Equipment	$         541,600
Cash	$           80,000
Accounts Receivable	$           60,000
Dental Supplies	$           36,000
Total	$         717,600
Total Liabilities
Accounts Payable	$           87,600
Total	$           87,600

Stockholders Equity	$         630,000