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15 September, 10:38

Elston Company compiled the following information as of December 31, 2014:Service Revenue $700,000Common Stock $150,000Equipment $200,000Operating Expenses $625,000Cash $175,000Dividends $50,000Supplies $25,000Accounts Payable $100,000Accounts Receivable $75,000Retained Earnings, Jan 1, 2014 $375,000Elston's stockholders' equity on December 31, 2014 is

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  1. 15 September, 14:21
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    The Elston's stockholders' equity on December 31, 2014 is $550,000

    Explanation:

    For computing the stockholder equity, first, we have to find out the ending retained earning balance which equals to

    = Beginning retained earning balance + Net income - dividend paid

    = $375,000 + $75,000 - $50,000

    = $400,000

    where,

    Net income = Service revenue - operating expenses

    = $700,000 - $625,000

    = $75,000

    Now the stockholder equity equals to

    = Common stock + ending balance of retained earning

    = $150,000 + $400,000

    = $550,000
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