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10 March, 17:12

On January 1, ABC started the year with a $400,000 balance in Retained Earnings and a $550,000 balance in Common Stock. During the year, the company reported net loss of $25,000, paid a dividend of $15,000, and issued more common stock for $30,500. What is total stockholders' equity at the end of the year?

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  1. 10 March, 21:09
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    The total stockholders' equity at the end of the year is $940,500 ($360,000 + 580,500).

    Explanation:

    The total stockholders' equity is an element of the balance sheet that comprises retained earnings and share capital (common stock) and share premium. Retained earnings is the accumulation of net income (loss) over the years. The changes in total stockholders' equity at the end of the year are as follows:

    ABC

    Extract from the statement of changes in equity

    Retained earnings Common stock

    Opening balance $400,000 $550,000

    Net loss ($25,000) -

    Dividend paid ($15,000) -

    Common stock issued - $30,500

    Total stockholders' equity $360,000 580,500
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